Pay Yourself First

What does 'Pay Yourself First' mean

Pay yourself first is a phrase commonly used in personal finance and retirement planning literature that means to automatically route your specified savings contribution from each paycheck at the time it is received.

Because the savings contributions are automatically routed from each paycheck to your investment account, this process is said to be "paying yourself first"; in other words, paying yourself before you begin paying your monthly living expenses and making discretionary purchases.

BREAKING DOWN 'Pay Yourself First'

This simple system is touted by many personal finance professionals and retirement planners as a very effective way of ensuring that individuals continue to make their chosen savings contributions month after month. It removes the temptation to skip a given month's contribution and the risk that funds will be spent before the contribution has been made.

Regular, consistent savings contributions go a long way toward building a long-term nest egg, and some financial professionals even go so far as to call "pay yourself first" the golden rule of personal finance.

RELATED TERMS
  1. Automatic Savings Plan

    A type of personal savings system in which the plan contributor ...
  2. Agency Automatic Contributions

    A benefit that federal government employees receive for participating ...
  3. Automatic Investment Plan - AIP

    An investment program that allows investors to contribute small ...
  4. Agency Matching Contributions

    A benefit that federal government employees receive under the ...
  5. Employee Contribution Plan

    A company-sponsored retirement plan where employees may elect ...
  6. Retirement Contribution

    A monetary contribution to a retirement plan. Retirement contributions ...
Related Articles
  1. Retirement

    It’s Never Too Late to Contribute to Your 401(k)

    Find out why it is never the wrong time to start contributing to a 401(k), even in your late 30s, 40s or 50s; discover how to maximize your savings at any age.
  2. Retirement

    Why Saving 10% Won't Get You Through Retirement

    Retirement experts often tout the 10% rule: To have a good retirement, you must save 10% of your income. The truth is, most people need to save far more.
  3. Retirement

    Retirement Planning: Troubleshooting And Catching Up

    TroubleshootingAs you build your retirement fund, you'll likely experience some bumps in the road along the way. One of the most common problems you'll encounter is an inability to make your ...
  4. Retirement

    Build Your Own Retirement Plan

    A step-by-step guide to planning for your retirement. The sooner you start, the easier it will be to build a good cushion for your future.
  5. Retirement

    8 Essential Tips For Retirement Saving

    These eight tips can help your retirement savings grow.
  6. Retirement

    401(k) Contribution Limits in 2016

    Find out what the contribution limits are for 401(k) retirement savings plans in 2016, including individual, employer and aggregate limits.
  7. Retirement

    The 4 Essential Elements of a Retirement Plan

    Learn about the four essential elements of an effective retirement plan, including maximizing your contributions and understanding your investment options.
  8. Retirement

    5 Retirement-Wrecking Moves

    These common mistakes can sabotage your nest egg and your plans for retiring.
  9. Financial Advisor

    8 Essential Tips For Retirement Saving

    Whether you're a saver or a financial advisor who want to give their clients a leg up, these 8 tips are essential for financial planning.
  10. Retirement

    Retirement Planning: Building A Nest Egg

    There are a myriad of investment accounts, savings plans and financial products you can use to build your retirement nest egg. Many countries have government-sanctioned retirement accounts that ...
RELATED FAQS
  1. Why should I pay myself first?

    The concept of "paying yourself first" is one of the pillars of personal finance and considered the golden rule by many financial ... Read Answer >>
  2. When taking a loan from my 401(k), is the loan before or after taxes?

    Is the payment towards it before or after tax from my contributions? ... Read Answer >>
  3. What are the best ways to lower my taxable income?

  4. What are the best ways to plan for retirement?

    Learn the basic steps to creating a solid retirement plan that can support you and your family, and find out how to manage ... Read Answer >>
  5. What are the Registered Retirement Savings Plan (RRSP) contribution limits?

    Review annual contribution limits for Registered Retirement Savings Plans and figure out how much you can invest for your ... Read Answer >>
  6. If I contribute to a 401(k) plan, can I still contribute to an individual retirement ...

    Participating in your employer's 401K plan can reduce or prohibit IRA contributions for your family depending on your spouse's ... Read Answer >>
Hot Definitions
  1. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  2. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  3. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  4. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  5. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
  6. Weighted Average Life - WAL

    The average number of years for which each dollar of unpaid principal on a loan or mortgage remains outstanding. Once calculated, ...
Trading Center