Pay Yourself First Delusion

If you automatically take 20% off your paycheck and put that in your savings (i.e. paying yourself first) then you will have 20% less to pay your bills. Doing so alone will cause you to not be able to pay all your bills but this is exactly what is advised by many blogs and videos. The idea is that once you see less in your account, you will 'spend less'. I beg the differ. I believe in starting with reducing your spending in unique an novel ways rather than the other way around. It makes a huge difference which way you do things. One will cause you to be not have enough money to pay your bills, the other allows you to reduce your spending at your own pace rather than trying to figure out how to meet the gap.

Other BeatTheBush Channels:

[Djwhynotlove]

Paying yourself first is a mindset that makes sure you are taken care of and you fight to make up the difference. It gets you to get off your ass and do something instead of counting and blaming

[hybby]

Pay Yourself First is from the book "Richest Man in Babylon". As it says in that book, "You pay everyone else first. The butcher, the clothing person, etc, and then save what's left. Instead pay yourself first. Pay yourself the first 10% you earn. Save & invest it. Use the next 20% to pay off your debts, and live on the remaining 70%"

This is really simple, and the way to begin. Paying yourself first IS saving. That's the point. Richest Man in Babylon says to start with 10%. Not 20%. 20% will be WAY too high for most people. So immediately, that's where your example goes off the rails.

And if you're only making $1000 / mo, and your bills are $1000 / mo, you need to either adjust how much you're earning, OR you need to cut back on how much you're spending on bills (move to a cheaper place, ride a bike, eat less expensive food, etc).

I recommend reading Richest Man in Babylon. It discusses this topic in detail.

[NANGSGARAGE]

Pay yourself first has helped me big time over the past 5 years. I say read “The Richest Man in Babylon”

This book will teach you how to budget.

[adambroussard]

I like hearing a different perspective on this phrase than I have before. I can’t remember where I heard it explained, maybe tony robbins or something. I understood the phrase as invest in yourself first (retirement accounts and all other things) even if it means you won’t have money for bills. Then, by the time it comes to pay the bills, you’ll have the added pressure to go out and earn more money via a second job or something. So then, not only are all those investments making you money, you’re also hustling and getting after it. I love how you talked about paying bills down opens up more income for you to invest with too. I’m much more in that category. I like to have the safety of knowing my bills are good to go. I may be limiting my potential though by not pushing myself and make earning more a necessity.

[jlina]

I always thought that too it's almost like a scam. The only way to deal with to deal with credit cards is to pay it immediately from checking imo.

[WayOfTheDuck]

I think its a psychology thing. If you are a person who doesn't change their spending habits when you have $200 in your bank account vs $2000, then paying yourself doesn't make sense. I think for a vast majority of Americans, they see their paycheck enter their bank account and they get some new toys and games and don't enter their super saver mode until it gets below $200. So when they pay themselves first, they enter their super saver mode earlier.

[CodiTheJedi]

This works for me :). Lazy saving method. Pay myself first to build up emergency fund and to fund roth ira, while keeping enough in checking to pay bills.

[Ian-ojdm]

I thought 'Pay yourself first' was to force those people that would blow their extra money after bills instead of saving it.

[warrenburwell]

Paying yourself first has an underlying assumption... That you are living within your means. The convoluted reasoning of your presentation sounds like permission to spend more than you make.

[MelissaBrownapt]

I am poor. So I can say this. DON'T MAKE BABIES, unless you are all set financially and you have figured out the cost of raising kids (+ the unexpected crap that always comes up). Working class folks just shouldn't do it.

And No. I have none.

[sonnymylovesosweat]

Pay yourself first means You are paying other’s people(Obligations) by paying them your hard earned money, If you can afford to pay them then you can also afford to pay yourself too every month.

[davidlee]

Its obvious that you should pay your bills if you are in debt. But once you are debt free you should pay yourself first

[nothing-wpti]

Some people actually believe it's better to save money in an account with 2% interest, than to lower debt at 20% interest.

[jonathanmcgovern]

Cut necessity costs where possible, pay necessities first, then yourself before non- necessities last

[shortchange]

Pay yourself first works for me my nest egg is getting buff lol i use to pay bills then eat fast food/restaurants shopping ect.. With the mindset to pay yourself first with obligation to "save" money it works. Not to save to go clubbing and have Vegas blowouts lol. But i see your point of veiw as well 👍

[Erick-bgcw]

Well, as Dave Ramsey says: "your income is the most powerful wealth building tool." However, you need to be out of debt first in order to pay yourself. That's why anyone with a good understanding of personal finance would advice you to pay all your bills and debt before actually "paying yourself", and even saving for retirement. It would make 0 sense for you to save money while making payments to credit cards with a 20% interest rate. Pay to sucker off and save what you were paying it and the interest.

[zjgvergara]

Great point. I do the same. Pay yourself first doesn’t make too much sense to the majority of the population.

[aaronvaldi]

Read the Automatic Millionaire by David Bach. He explains it.  It is different. Not at all as you explained. Thank you again for all your help, wisdom and knowledge.

[Exoticbeauty]

Yes I agree if I did that I know I would be going into my savings or borrowing money to pay bills. I feel better once all my bills are paid.

[MrJamescord]

The Richest Man in Babylon- a must read, it explains why in great detail, and about also enjoying life in the process.