"Pay yourself first" flips traditional budgeting on its head. Instead of saving what's left after spending, you save first and spend what's left. This simple mindset shift is one of the most powerful wealth-building strategies ever devised.
What Does "Pay Yourself First" Mean?
When you get paid, the first "bill" you pay is to yourself—your savings and investments. Before rent, before groceries, before Netflix, you transfer money to your future self. Then you live on whatever remains.
This approach treats savings as a non-negotiable expense rather than an afterthought. Most people do the opposite: they pay bills, spend on wants, and save whatever is left (usually nothing).
ℹ️ The Difference It Makes
Traditional approach: Income → Expenses → Savings (maybe) Pay yourself first: Income → Savings → Expenses (adjusted)
Why This Strategy Works
- Removes willpower from the equation: You can't spend what you don't have in your current account
- Prioritizes your future: Savings happen regardless of spending temptations
- Adapts your lifestyle: You naturally adjust spending to match available funds
- Builds wealth consistently: Regular contributions compound over time
- Reduces financial stress: Knowing you're saving brings peace of mind
How to Implement Pay Yourself First
Step 1: Decide How Much to Save
A common starting point is 10-20% of your income. If that feels impossible, start with 5% or even 1%—the habit matters more than the amount initially.
Step 2: Automate the Transfer
Set up a standing order to move money to your savings account on payday. If you get paid on the 28th, schedule the transfer for the 28th. Don't give yourself time to spend it.
Step 3: Make It Hard to Access
Put savings in a separate account, ideally at a different bank. The extra friction of transferring money back discourages impulse withdrawals.
Step 4: Live on the Rest
Adjust your spending to fit your post-savings income. This might require cutting expenses or changing habits, but you'll adapt faster than you think.
Calculate Your Savings Goal
Use our savings calculator to see how paying yourself first can help you reach your financial goals.
What Counts as Paying Yourself?
Prioritize these in order:
- Emergency fund: Until you have 3-6 months of expenses saved
- Employer pension match: This is free money—always maximize it
- High-interest debt: Paying off 20%+ APR debt is like earning 20% guaranteed
- Additional pension: Tax advantages make this powerful
- ISA investments: Tax-free growth for long-term wealth
- Specific savings goals: House deposit, wedding, car, etc.
💡 Couples Strategy
If you budget as a couple, agree on a joint "pay ourselves first" amount that goes to shared goals. You can also each have individual savings for personal goals.
Overcoming Common Obstacles
"I Can't Afford to Save"
Start tiny. £25 per month is £300 per year—better than nothing. As you adjust to living on less, gradually increase the amount.
"I'll Save More Later When I Earn More"
Lifestyle inflation is real. People who earn £100k often save no more than those earning £40k. Build the habit now, regardless of income.
"I Have Too Many Bills"
Review your expenses with fresh eyes. Cancel unused subscriptions, negotiate bills, find cheaper alternatives. Even small savings free up money to pay yourself first.
Pay Yourself First in Action
Emma earns £2,500/month. She decides to pay herself first with 15% (£375):
- £200 → Emergency fund (until she has £5,000)
- £100 → Stocks and Shares ISA
- £75 → House deposit fund
She lives on the remaining £2,125. At first it felt tight, but she found she didn't really miss the £375. After one year, she'd saved £4,500 without thinking about it.
About iBudget
iBudget helps couples and families take control of their finances with simple, collaborative budgeting tools. Track spending, set goals, and build wealth together.
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