Why You Need to Pay Yourself First Even if You’re Broke
Surely you’ve heard the advice to “pay yourself first,” but what happens if you never have any money left after the bills are paid? When you wake up every day and the bills are piling up, you’ll wish you had followed this simple piece of financial advice sooner. Now you’re broke, and the money is gone. How can you possibly pay yourself first now?
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Why should I pay myself first?
Paying yourself first sounds easy. The trouble is that life is so expensive. And if you run into a little bad luck or made a few poor financial decisions (or both!), money is tight. And when money is tight, you need to squeeze every penny to get to the end of the month… or do you? What if I told you the secret to getting ahead and gaining some financial traction is to pay yourself first?
It's true. Without a little money set aside, how will you pay for a new tire if your goes flat? Or an exterminator if your house suddenly becomes overrun with carpenter ants? (That happened to us, by the way, and we had to pay over $500 to have someone come out and spray for all the ants!)
If you have even a tiny sliver of hope to break free from the chains of debt, you’re going to need to pay yourself first. You don’t want to be a slave to debt forever, right?
Think about this:
- Two-thirds of Americans aren’t putting money into their 401(k) plans
- 23% of us don’t have any emergency savings
- 49% of Americans are anxious and live in fear about their current financial status
If you’re one of the 49% who is fearful about your finances, it’s time to change your habits. No more putting it off, don’t wait until tomorrow – decide to start today.
How long have you been living paycheck to paycheck? Has your money situation gotten any better over the last year? Probably not. According to the Census Bureau, the median household income was $61,372 in 2017. If you had set aside 1% of your money over the past year, you’d have more than $600 in the bank right now.
Could you imagine how good it would feel if you had $600 more than you have right now?
You've got to pay yourself first. It’s the only way to protect yourself from the bad stuff life throws at you.
But I don’t have extra money to pay myself first!
I know you’re broke. I am, too! But we have to figure out a way to make it happen, and fast.
If you’re having trouble keeping up with your current bills, paying yourself first becomes even more critical. If you wait until the end of the month, there isn’t any money left to set aside for savings. And saving money is the key to financial success.
When we finally realized this, Andrew and I sat down and had a good talk about money. We put everything in a spreadsheet to see where it was going every month and found out we were in real trouble. If you take a look at where Andrew and I spent our money, you’ll see we weren’t putting any money into savings – it’s all going to basic necessary living expenses and a ton of debt. And even though we successfully managed our finances to pay off a third of our debt a few years ago, we got off track and needed to refocus our priorities.
After seeing what our monthly budget numbers really looked like, we knew something had to change. So, we decided to pay ourselves first. Not wanting to jeopardize our finances too much, we started with a very tiny 1% and set up direct deposit to automatically transfer 1% of our pay to a savings account. Out of sight, out of mind!
We'll probably miss it the first month or two because money is tight – but it’s been tight for so long, I’m sure it won’t feel a lot different.
How to pay yourself first when you’re broke
The best way to save money is to automate it. That way, you won’t have the choice not to do it – it’ll happen without even thinking about it!
- You can do like we did and set up a direct deposit to automatically send money to a savings account from your paycheck – that’s the “no-brainer” way to do it. Even if 1% is all you can afford right now, it’ll add up to big money over time.
- Probably there’s room in your spending to cut expenses, too. That means saying goodbye to eating out and buying lunches at work. Instead, plan your meals at home and pack a lunch for work. We also cut cable and saved over $50 a month doing that – so, that might be an option for you to consider, too.
- Earning extra money will help you get ahead when you’re working on paying yourself first. Think about quick, easy ideas that don’t require any money upfront. This means no Pampered Chef or ITworks businesses. Instead, make money on the skills you have. Sell some baked goods, clean up lawns in the neighborhood, run errands or clean other peoples’ houses to earn some extra cash. If you're a whiz at details, you can start offering Virtual Assistant services.
- And when money is tight, pray about it. God always provides! I know it was never God’s plan for my life to walk around burdened by all of the debt I’m carrying — and it isn't His plan for you, either.
I know it’s hard! You’re afraid you won’t have enough money to pay your bills if you take away part of your paycheck. But I promise you will make it work. Because we’re survivors, right? We always figure it out.
It just takes one step in the right direction to get you on the path to financial freedom. Start with this one simple thing – pay yourself first – and build from there.
