5 Ways to Pay Yourself First When Income Arrives
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5 Ways to Pay Yourself First When Income Arrives
According to Investopedia, paying yourself when income arrives is simply building up a retirement account, saving for long-term goals, and creating an emergency fund bank.
When it comes to personal finance, one of the central principles is to consider yourself first.
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By considering yourself first, we do not mean buying cars, clothes, renewing data bills, and probably subscribing to Netflix.
Of course, you can do all these when you profit from your business or receive payment from work.
However, the context of paying yourself first is slightly different in this article.
Whether an employee or an entrepreneur, you need to plan all expected income or profit savings. You can easily divert them into these other less essential channels.
By paying yourself first, you secure long-term financial stability for yourself, thereby helping you in the long run.
Without a doubt, short-term needs like entertainment and other bills may arise.
However, in this article, we will show you how to pay yourself first to secure a stable financial status in the long run.
Key Highlights
🎯 When it comes to personal finance, one of the central principles is to consider yourself first.
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🎯 One of the best practices is to automate your savings.
🎯 40% of insured people wish they had purchased an insurance policy earlier.
🎯 These methods have helped many people, and we do hope you will be one of them.
🎯 Trying to evade paying debts would most definitely prevent you from saving.
🎯 Opening an individual account for your side hustle profit could be an excellent way to pay yourself first.
SEE ALSO: 5 Sure Ways to Cut Expenses to Grow Your Business
SEE ALSO: 15 Rewarding Hustle Ideas To Make Money Online In 2022
5 Ways To Pay Yourself First
1. Consider Automatic Saving Options
If you find it hard to pay yourself first when income arrives, one of the best practices is automating your savings through direct debits from your account.
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If you own a checking account in a bank, you can easily create and link a savings account to the checking account.
Upon setting up this link, you can activate a recurring transfer of a specific amount of money from your checks account to your savings.
This scheduled payment happens automatically, primarily following your specifications.
If you receive a salary-based income, you could fix automatic deductions probably a day after your payday.
You can save more money via this method, as manually transferring money to savings accounts can be daunting when immediate needs arise.
Alternatively, you could consider spending and making purchases with apps like Acorns.
This app rounds up a linked card purchase to the nearest dollar and saves extra money on minor investments for a user.
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2. Clear Your Debts
According to research by Fortuny, personal loan debt in the United States rose from $46 Billion in 2011 to $150 Billion in 2019.
Furthermore, a research article by CNBC also revealed that the total consumer debt of 2021 amounted to $15.6 Trillion.
That should tell you how standard personal loans and debts are these days.
Paying off personal debts like credit card debts and personal loans is always a perfect idea for paying yourself first.
Moreover, these debts could incur high interests, attracting, even more, cost in the future.
Trying to evade paying debts would most definitely prevent you from saving.
To ensure debt payment, you can assign a particular payment schedule in your bank to automatically credit your debt account immediately when you receive funds.
When income arrives, you could use apps like the Debt Payoff Planner app (Android, iOS) to improve saving habits.
This app is one of the simplest debt payment apps out there, as it provides you with detailed plans and tips on how you pay off loans.
To set up a debt repayment plan on the Debt Payoff Player, you must:
- Make a comprehensive list of your total debts.
- Rank these debts according to their interest rates.
- Utilize side hustles for quicker payoff.
- Focus on one debt at a time, starting from the most important.
This app does not provide money for debt payments.
However, it is a perfect guide for better debt payment skills.
Other apps like Quoins are also suitable for debt repayment.
Typically, they offer an automated system that saves money by rounding up purchases to nearest round figures and paying these extra savings towards significant debt repayment.
3. Pay Life Insurance
A whopping 40% of insured people wish they had purchased an insurance policy at an earlier stage.
Now that should tell you the importance of life insurance.
If you intend to pay yourself first, making regular payments towards a life insurance policy could be a significant step.
If you find it hard to keep up with the monthly billing, you could consider annual payments.
Moreover, you could save more on discounts by making these annual payments.
4. Reserve a Portion of Income From Side Hustles
You can consider saving all income if you have a side hustle aside from your main job or business.
Whether you are engaged in a 9-5 job, anyone can start a side hustle today.
To make things even easier, we have arranged a unique article on how to plan a side job with an engaging 9-5 appointment.
For a list of these hustle ideas, you can read them here.
By placing your side hustle gains in your savings, you could unlock a massive stream of quality financial diversity.
Opening an individual account for your side hustle profit could be a fantastic way to pay yourself first. These profits could accumulate and serve as part of your immediate savings.
There are numerous lucrative side hustles today.
Thus, it is easier for people to make money via side gigs.
According to a 2021 survey, one in every three (34%) Americans has a side hustle. Moreover, 24% of people in the country are already planning on starting side hustles.
5. Start With Small Savings
As you have seen already, one of the best ways to pay yourself first when income arrives is to save your income.
However, Saving is a habit that requires some time to master.
If you are uncertain about how much you can save when your income arrives, it is advisable to start small.
Saving brings about self-gratification, which could persuade you into even higher savings.
Rather than planning for the perfect time to kick-start savings with massive amounts, you can start with little money per month.
If you have at least $100 to spare most times, you could consider setting up a monthly transfer schedule to your savings account.
Although it may seem insignificant, it is one of the best ways to pay yourself.
Once you find a savings plan easy, you can always increase the monthly cap depending on your income.
While starting savings with little cash is always awkward, the results are outstanding.
To ensure your funds are in the right place, you could use saving apps like Digit to secure your funds with good bonus interests.
Alternatively, you could use a direct savings account from your financial institution.
Final Thoughts
Though it sounds easy, paying yourself when income arrives is quite tricky.
However, it is a necessary principle in personal finance, as it allows you to build a better financial future.
Suppose you find it difficult to pay yourself first when income arrives. In that case, you can carefully follow all methods given in this article.
From research, these methods have helped many people, and we hope you will be one of them.
