The concept of paying yourself first has never been more important to me than it is now. Buying a house put a drain on our savings, to put it mildly. Since I’m handling the finances, I know what our cash outlays are, and besides our regular monthly bills (mortgage, car payment/insurance, utilities), I decide how much to pay to credit card debt each month.
But before I do that, I “pay myself.” Meaning I toss a set chunk of money into our savings account in order to rebuild our nest egg.
It’s definitely a popular strategy in the world of personal finance. But you have to know how much you can save so you don’t come up short of cash at the end of the month. And you also want to balance what you’re savings against how much debt you need to pay off. In some cases, it’s more advantageous and money-saving to pay off your high-interest debt first.
I “pay myself” manually by moving the cash (the amount varies from month to month)from our checking account to our savings account. But as Frugal Dad points out , there are other ways to do this. Automatic deductions done by your employer for 401(k)s and setting up automatic transfers between bank accounts to coincide with payday.
Having the money in the savings account helps Mr. Saver and I rein in our spending, since we only take funds out of the checking account. If it’s not there, we can’t spend it, right?