I was thinking today about the phrase ‘pay yourself first’. It’s one of the most important rules of personal finance. The idea is that whenever we get money coming in (eg: our salary), we immediately put aside some percentage (eg: 10-20%) for our savings / investments. Only when we’ve done that do we worry about things like paying rent, buying food, going out etc.
Here’s what JD Roth (writer on the great website Get Rich Slowly has to say on the topic:
When you pay yourself first, you’re mentally establishing saving as a priority. You’re telling yourself that you are more important than the electric company or the landlord. Building savings is a powerful motivator — it’s empowering.
Paying yourself first encourages sound financial habits. Most people spend their money in the following order: bills, fun, saving. Unsurprisingly, there’s usually little left over to put in the bank. But if you bump saving to the front — saving, bills, fun — you’re able to set the money aside before you rationalize reasons to spend it.
Earlier today, I was eating out at a Pakistani restaurant in Aberdeen, Scotland with a few friends. We ordered some biryani, nihari, lamb karahi and (after much deliberation) a mixed vegetable curry thing to try and be healthy. When the food arrived, the veg was closest to me, and so I spooned some of it into my plate first. After that, I found myself having smaller portions of the rest of the food than I normally would’ve. My friend sitting across from me asked 'why are you taking the veg first?’. I immediately joked 'because I want to pay myself first’.
My friend didn’t get the reference (he isn’t a personal finance nerd sadly) but I realised after I said it, that the 'pay yourself first’ mindset applies to so much more than just money. Most of us treat veg as an afterthought - we put the carbs and protein in our plates first, and leave the veg to the end to take up whatever space is left on the plate. The veg is often the healthiest part of the meal, and so if we ’ paid ourselves first’, we’d prioritise the veg over the other stuff.
When going through our to-do list, if we paid ourselves first, we’d prioritise the most important, highest leverage task. Instead we tend to put that off, doing menial things like checking our email, or ticking off the less important activities first.
When approaching the end of the day, if we paid ourselves first, we’d prioritise getting 7-8 hours of sleep, rather than scrolling though instagram or reading paranormal romance books until 3am.
So I’ll leave you with the question - what other parts of our lives can we apply the 'pay yourself first’ mindset to?
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