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Like all things worth doing, budgeting is one of those areas where you’ll hear a lot of contrary opinions being paraded as if they were the truth. The fact is, for a budgeting strategy to work for you and your family, it has to match your unique situation. Your income level, access to high-interest savings account products, risk appetite, and overall temperament all need to be just right for a specific strategy to consistently provide positive returns. However, some budgeting strategies just work great in a lot of people’s situations. The “Pay Yourself First” approach is particularly useful for those anyone who wants to create a safe buffer in their savings, but is not ready to take on the risks associated with more volatile investment types. The main premise of this approach is to set aside a set portion of your income for savings before spending on anything else. When done right, it can ensure safe and steady progress towards securing
your personal wealth as well as achieving specific financial goals.
How You Can “Pay Yourself First” More Easily
As far as saving strategies go, Pay Yourself First is as simple as it gets. All you need to do is the following:
Create Specific Savings Goals
A goal gives you something to work for and encourages you to save rather than use your cash for discretionary purchases. To set yourself up for success, identify specific targets like an emergency or retirement fund of a specific size. The Philippines’ Maya Savings is perfect for this, as it offers a Personal Goals feature with a guaranteed interest rate.
Set Up Automatic Transfers
Automatic transfers save time and take the guesswork out of adding to your savings each payday. Over time, you’ll come to regard the deducted amount as the cash that you really have available to you for your wants, which may psychologically keep you from unnecessarily tapping into your funds.
Adjust Your Lifestyle to Your Reduced Budget
Since you’re not going to be drawing from your savings, you’ll want to plan your budget based on the remaining income. Make sure to leave room for things and activities you enjoy so that you don’t feel deprived and get tempted to withdraw from your savings.
Track and Review
Every year or so, check your progress and adjust your saving strategy as necessary.
Why You Should Seriously Consider This Strategy
As long as you have a regular income and comparatively low expenses, Pay Yourself First can rapidly increase your financial breathing room without severely impacting your day-to-day lifestyle. Here are some of the more specific benefits of this underutilized approach:
1) It Automates Discipline
If you find yourself having second thoughts each time you do cash transfers, you might find that you’ll sometimes delay them or reduce the amounts. Fortunately, automating your savings makes the process effortless and consistent, enforcing financial discipline without increasing the demand on your limited emotional resources.
2) It Reduces Impulse Spending
Saving first effectively limits the amount of money you have available for discretionary
spending. This naturally curbs impulsive purchases and encourages more thoughtful use of whatever funds you have left.
3) It Encourages Goal Setting
Setting clear goals is an underrated part of successful personal finance. Without a goal, you have no immediate motive to save, which just encourages you to spend prematurely. But by going with a goal- oriented approach, you can be sure that your planning is aligned with your personal objectives, whether it’s an emergency fund or saving for higher education.
4) It Contributes to Your Financial Growth
Thanks to compound interest, your consistent contributions to your savings will result in exponential earnings over time. In other words, the more you save and wait, the more money your money will earn. Even small, regular deposits can accumulate significantly, which is why the Pay Yourself First approach is especially impactful for those just beginning to climb their career ladders.
5) It Affords You More Flexibility
Unlike other more aggressive strategies, Pay Yourself First is far more adaptable to various financial situations. Whether saving for short-term or long-term goals, the principle remains effective and can be tailored to different income levels and financial commitments.
6) It Will Reduce Stress Associated with Spending Money
After a few months of doing this strategy, you might not even realize that you’re accumulating a sizable safety net. Knowing you are steadily building your finances can do a lot to reduce stress, potentially making you happier overall.
7) It Encourages Positive Financial Habits
Going with a Pay Yourself First approach can build a solid foundation for good financial habits, which may benefit you later if you want to go into more advanced investments. Most importantly, since regular saving is now automatic, you’ll find that you’re developing a positive attitude towards money management that also translates into other parts of your personal and professional life.
Overcome Financial Roadblocks with Strategic, Human-centric Saving
The “Pay Yourself First” strategy works because it directly addresses the usual human roadblocks that actually affect the long term health of our finances. Unlike other alternative money practices, this menthod accounts for human factors while still making savings a top priority.
This approach has proven helpful if practiced with consistency, arguably the most important thing in achieving financial stability.
For more information and tips on family finances, check out https://www.mayabank.ph/savings/
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