Pay Yourself First

Your savings rate is key for measuring your financial health and achieving financial independence.
​
But which comes first: saving money or paying expenses?
​
Some people believe that your expenses should determine your savings rate. They pay for essential needs and wants, and then save what is left over. The problem with this approach is that we often mentally justify "wants" by labeling them as "needs," which drives spending higher.
​
The better approach is to "pay yourself first" by automatically transferring money to your emergency fund, 401k, investment account, and Health Savings Account each pay period. By creating automatic transfers immediately after payday, you reduce the mental burden of having to login and complete it manually.
​
If you have a lot of debt, focus on paying that down before you can start saving aggressively. The same automated approach works for eliminating debt like credit cards and student loans.
​
By setting up these systems to automatically save & invest, you will see your net worth climb higher over time. Let your money work for you 24/7 by paying yourself first.