I’m on my stepfather’s footsteps to “ pay me first ”

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• My stepfather retired comfortably at 63 by following a few simple rules about money.
• One of its rules that helps me build wealth is “pay yourself first”. Before paying bills, my husband and I contribute to our savings and retirement accounts.
• Before we started paying ourselves, we tried to put away whatever was left over at the end of the month – but there was rarely anything to spare.
• Use Blooom to analyze your 401 (k) today and see how you can increase your retirement savings »

For me and my family, staying on a budget has been essential to paying down debt, saving and investing more for our future. One of the things I love about budgeting is that there is no one size fits all. I have changed my budgeting method and practices a few times over the past few years, and it has only improved my financial life.

As I start to focus more and more on investing and getting off to a good start with retirement savings, my husband and I have started using a well-known strategy that fundamentally flips the traditional budget. Seeing how my stepfather comfortably retired without having to pay a dime or stay on a strict budget, we chose to do the same and use the “pay yourself first” strategy.

What does “pay you first” mean?

When payday rolls around, my natural instinct has always been to see what bills to pay. The mortgage is always due on the first of the month, then there are utilities and household needs. The cupboards might look a bit empty, suggesting it’s time to do some grocery shopping.

While all of these expenses are significant, I decided to prioritize paying myself first. This means that I often look at my savings and investment goals first and transfer money for those needs. before budgeting for the rest of my monthly bills.

Some of the habits that I have developed with this method include:

• Transfer $ 500 to my IRA each month to maximize contributions for the year
• Setting up automatic transfers to my high yield savings account where I keep my emergency fund
• Automatically save money for my son’s college fund

Since I’m self-employed, I don’t have access to a 401 (k) where I can make easy pre-tax contributions before my paycheck even reaches my account. However, an IRA is just as useful, and I’ve set up automatic transfers through Betterment, a low-cost robo-advisor, so I don’t have to think about it.

It was a little scary at first to transfer a huge amount of money to savings and investments, but it works a lot better for me than saving after the fact. I spent too many years thinking that I would build up my emergency fund or put money in for retirement at the end of the month if the money remained. Most of the time, there was nothing left.

By paying ourselves first, my husband and I make sure we tackle our key financial goals early on. Then we budget everything else with what’s left.

Budgeting for everything else

Budgeting for everything else with the Do-It-Yourself model isn’t hard when you’re living under your means and avoiding high interest debt.

My husband gets paid weekly, and I get paid at different times of the month as a freelance writer, so we aim to sit down and discuss our spending for each week. It’s often on or after his payday, and after that we’ve first paid ourselves.

Yes, I could probably do something with the $ 500 that I automatically send to my IRA each month with all the money we save by paying ourselves first. But since it’s not available, we learn to make it work with what’s left.

Once priority needs and expenses are covered, we tend to focus on flexible spending last. These are things like memberships, clothing, entertainment, shopping, and dining.

Try not to limit desires

By paying myself first, I feel like I have more freedom and flexibility when it comes to cravings. Some months we may have less to spend on necessities, especially if we are working towards a specific goal.

However, if I want to order something that I see online, order a meal for dinner, or buy a birthday present for someone, I can do that without worrying about whether I will have enough savings in my pocket. the end of the month.

Since getting paid first, I’ve already made progress on all of my savings and investment goals. This reduces the pressure for a penny or a strictly budget.

I’m on my way to saving a lot more this year

My income hasn’t really increased drastically this year, but I’m on my way to saving a lot more than ever before. I will be able to maximize my retirement savings for the first time, we have done a lot of house projects and I regularly save for my son’s college education instead of making excuses for not having enough (as I did) for several years before I started paying myself).

Paying yourself first is a great habit that can teach you to mentally prioritize saving, investing, and your personal financial goals. There will always be bills and living expenses to pay, but it’s important for me to know that I’m putting myself first, preparing for the unexpected, and securing my future at the same time.