If you’re serious about building financial wealth (or saving for an international holiday), it’s time to change your savings strategy and pay yourself first – yes, you.
‘Paying yourself first’ ensures you make the most of every cent so you can reach your financial goals.
And like any new habit, it just takes a little practice to adopt this smart savings strategy.
Understanding this savings strategy
Most Aussies live for payday.
And whether you’re paid weekly, fortnightly or monthly, payday can never come quick enough.
But by the end of the pay cycle we often spend our entire budget and there’s nothing left to put away.
‘Paying yourself first’ ensures you make regular and consistent savings contributions so you can reach your financial goals.
‘Paying yourself first’ isn’t about how you earn money either, it’s about how you save money.
This clever and easy to adopt strategy means you literally put money into your savings account before you pay bills, go out for Friday night takeaway or buy a new pair of sneakers – easy.
Think of it as your new payday ritual – as soon as your employer pays you, you then pay yourself.
Practising this savings habit makes perfect
Any new habit or routine requires discipline.
Whether it’s going to the gym or quitting sugar, you need to set some ground rules to ensure you stay on track and see results.
Paying yourself first is the same. You’ll need to train your savings muscle until this strategy becomes second nature.
And as soon as you start seeing your savings account fatten up, you’ll be even more motivated and inspired.
How to pay yourself first
Think of your savings contribution as a bill – it’s a mandatory ‘expense’ that must be paid.
Prioritise it over and above all of your other expenses and living costs.
Then once you’ve paid yourself first, you can then pay your other bills – not the other way around.
The danger of paying bills and living costs first (including nights out and food delivery) is that there is rarely much left over, so you won’t feel motivated or inspired to save.
Remember, slow and steady wins the race.
You don’t need to put away large amounts of cash on payday so you’re forced to live off baked beans and two-minute noodles – even if they’re both low-key delicious – regular and consistent contributions is the secret to financial security.
Set a budget
To adopt this smart savings habit, you’ll need to review your current spending.
Check out your everyday account statements to see where you’re splashing your cash.
Look at your bills and see if you can find a better deal – you could save hundreds by switching to a cheaper provider.
Once you have a clear idea of your spending habits, you’ll be able to set a savings budget.
Whether it’s $40, $100 or $300, think of it as a mandatory expense that must be paid first.
And if you want to fast-track your savings, look at areas where you can cut back.
From bringing your lunch into work Monday to Thursday to ditching your monthly manicure, a few tweaks can make a big difference.
One way to build a thorough budget is to create ‘budget buckets’ for how much you spend on each of your life expenses.
Open a dedicated savings account
It’s a no-brainer really. Opening a dedicated savings account is a smart way to separate your savings from your everyday money – having all your funds in the one account makes it way too easy to spend and splurge.
By opening a Savings Stacker with ME, you can personalise your account name, which will be a constant reminder of your newly adopted saving strategy.
You can also save more money by choosing a savings account that earns interest.
In fact, if you open an Everyday Transaction Account alongside your Online Savings Account with ME, you could enjoy a variable bonus rate – that’s money for jam.
Out of sight, out of mind
‘Paying yourself first’ requires a little discipline. It requires you to change your savings habits and not splurge on payday (sorry, those new headphones can wait).
The easiest way to adopt this golden rule is to ask your employer to pay your wages into two accounts – an everyday account and a dedicated savings account.
This “out of sight, out of mind” approach does the hard work for you and ensures you won’t skip a ‘payment’.
Otherwise you need to apply a little bit of self-discipline in setting aside some savings cash when you do your payday banking.
Think of it as a little payday ritual to build a more secure future, or helping you reach an exciting goal (hello, Tuscany!).
Saving money the easy way
If you struggle to save money or find you never have any savings left, it’s time to switch your savings strategy and pay yourself first.
This means adopting a new payday ritual and putting a percentage of your income into a dedicated savings account before you pay bills and living expenses.
Paying yourself first gives you greater visibility into your financial future.
It’s a motivating and game-changing savings habit that will help you reach your money goals.
To see how much you should put away, crunch some numbers using the ME savings calculator and kickstart your new favourite savings strategy.
This article is prepared based on general information. It does not take into account individual financial objectives or needs, and is not financial product advice.