Pay yourself first

Pay yourself first – Easier said than done! So many of us wish we could be saving, but then payday comes, we pay our accounts, buy groceries, debit orders go through, and if there’s a bit left we invariably spent on some treats – take-aways or a movie.

Sound familiar? … and then payday comes again, and the cycle repeats itself…

The trick to paying yourself first is to build your spending around your savings and not the other way around. Turn your budget on its head.

With traditional budgeting, you start by listing your expenses, prioritising those that are fixed and then you move down until you reach those that are irregular and less important such as entertainment and luxuries.

Some people may even follow a 50/30/20 approach, where 50% is allocated to necessities, 30% to wants, and 20% to saving and debt repayments. I personally find this too rigid as we all live different lives and there is never a one size fits all.

Steps to budgeting the “pay yourself first” way

1. Know what’s coming in

List your income (after tax) along with any other income you may receive, such as maintenance or side hustle income.

2. Get a realistic picture of what you’re spending

There is no point in trying to budget if you don’t know what you’re actually spending, particularly on variable items such as petrol, clothing, or groceries. You may think, for example, that you spend R5,000 a month on groceries, but in fact, it’s much more if you add up all the stops on the way home from work. Scrutinise your bank and credit card statements for the past month to get a true picture.

3. Identify your savings goals

Write down your goals and how much you wish to allocate to each goal. An emergency fund and saving for retirement should be your most important goals, followed by other goals such as a holiday, home repairs, or a new car. You may also include saving for your children’s education. Let’s say you bring home R20,000 a month. Your goals could be:

  • Emergency fund: R500 a month
  • Retirement fund: R1000 a month
  • Children education: R300 a month

That’s R1,800 a month that you will set aside for saving. You have R18,200 to fund the rest of your expenses.

4. Rebalance if needed

Hopefully, you have enough money coming in to cover your fixed expenses as well as your savings goals. If not, you will have to rework the numbers to balance your budget. The information which you gathered in step 1 becomes crucial – you don’t want to end up overspending because you miscalculated. If you need to generate more income, consider a side hustle, if you don’t already have one.

5. Put your money to work

Keep each goal in a separate bank or investment account, so you can keep track. Set up debit orders for each goal. For long-term goals such as retirement or children’s education, invest in a retirement annuity or unit trust fund. Get professional advice around this. For your shorter-term goals, use savings pockets if your bank offers them, and name them (e.g. Holiday Fund, or Emergency Fund).

If your bank doesn’t offer separate savings pockets, open a new bank account for each goal, but it’s cheaper if your bank offers multiple pockets (such as Capitec with four extra savings pockets) as they only charge one service fee across the pockets.

FNB also has a nifty facility in that every time you swipe your debit card, the amount is rounded up to the nearest Rand, and this money is transferred into a savings pocket. It’s an easy way to start building up an emergency fund without any pain! You can also elect to top up the savings account with an extra R2, R5, R10, R20, or R50 every time you swipe.

This system is really easy to use and implement and you don’t have to stress or feel guilty because you are not saving every month. It’s all about financial balance – easy to achieve if you just pay yourself first!

This article was written by Sylvia Walker, financial planner, speaker and author of smartwoman.

Mums, do you ‘pay yourself first’? Have you learnt any new tips above?

Comment below and let us know x

34 thoughts on “Pay yourself first

  1. abigail.titus1 says:

    Thanku @mumbox. Helpful article. I definitely try and pay myself first, as sometimes there’s more month than money !! haha. So paying yourself first, and creating different “wallets” or savings accounts for different goals are super helpful. Failing to plan, is planning to fail.

  2. Bishonia says:

    Thank you Mumbox. Very informative and helpful to people like me who just want to spend without saving anything. I will take note of tips and start to plan before I spend.

  3. says:

    Thank you for teaching us to be in touch with our realistic situation, step 2 is what most people don’t want to face, we end up spending the money we don’t have or have debts above our income

    • Thabisa says:

      I am one of the people that struggle to budget. I will definitely use the tips to improve my finances more. I always worry about paying the rates, water and electricity and creche fees and the rest😅😅😅

  4. Marlene says:

    i’ve just opened an emergency account with FNB ,i’m proud of myself for someone whose been struggling to save its very helpful..i’ve been struggling to pay myself first so FNB made things easier for me!!..

  5. Meet_the_neutrals says:

    I was thinking about step 3 the other day.
    Why am i not saving up emergency funds. its stressful when the kids gets i’ll and you running low on cash.
    This month will be completely different all the luxury money can be saved up as emergency money. There is no need for that Its due time that we start eating right and plan right.
    these tips are extremely useful. i appreciated the post

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