If you automatically take 20% off your paycheck and put that in your savings (i.e. paying yourself first) then you will have 20% less to pay your bills. Doing so alone will cause you to not be able to pay all your bills but this is exactly what is advised by many blogs and videos. The idea is that once you see less in your account, you will ‘spend less’. I beg the differ. I believe in starting with reducing your spending in unique an novel ways rather than the other way around. It makes a huge difference which way you do things. One will cause you to be not have enough money to pay your bills, the other allows you to reduce your spending at your own pace rather than trying to figure out how to meet the gap.
How’s it going everybody business beat the bush today i like to talk about paying yourself first now i did a little bit of youtube watching on other personal finance videos and all of these keep on saying pay yourself first this concept somehow seemed to have form somehow with personal finance blogs and youtubers when i first heard about it it’s sort of makes sense
But when i thought a little deeper into it i was like wait a minute how can this actually work paying yourself first really means to take money out of your paycheck and put it in a savings account or an investment account and sort of let that money build instead the concept is to take money out of your paycheck before you even see it in your checking account so
That you would not be prone to spending it now for people that do not use credit cards and they’re only spinning out of their checking accounts sure that may work if you use credit cards that may not work so well because by the time you get the statement you’re not limited by the amount in your checking account you’re limited by the amount of credit limit on your
Credit card instead now some videos even does it a little bit wrong saying that you should pay yourself first before paying bills credit cards mortgages and including saving money now what does that mean if you’re paying yourself first and you’re not saving this money does this mean that you’re paying yourself first to buy stuff does this mean that you’re paying
Yourself to further your education in all these cases if you’re living paycheck to paycheck let’s say you bring in a thousand dollars every month and then your bills and everything adds up to be one thousand dollars sure you can go and go to your direct deposit and say okay every single month take 20% out take $200 and stick it in the savings account right away
Now if you just do this at the end of the month you’re gonna see oh i have $800 to spent but i have $1,000 worth of bills this does not add up then does this mean that you’re going to owe the credit card $200 this paying your self-concept is not really complete because it’s saying that if you save first you’re automatically going to spend less some people reduce
Their spending as much as they can already and if they take more money away from what they can use to pay their bills they’re essentially not going to be able to pay their bills therefore they’re gonna go back to their savings account they got some money and then pay their bills anyway now for me i never pay myself first in fact i always pay myself last instead i
Always make sure i take care of all my obligate all my bills mortgage rent credit-card bills i just pay everything in full initially when i was making really little i basically just did not spend all that much as my income grew more and more after graduation i held my standard of living roughly the same and in fact my cost of living actually decreased more and more
As i became more aware of my financial situation now i don’t really remember how many percent of my income i was saving it was usually something really really large more than 50% even when i first got out of school then as time went on it went to like 50% 60% 70 80 90 and then at some point it’s actually at 100 percent of my income that i actually saved so you see
The mentality is a lot different here i actually paid all my bills first but i made sure that everything that i spent into my bills i minimize those as much as i can then everything that’s over and beyond my expenses are essentially put into savings and as soon as that savings ballooned up to more than one year of emergency savings all of that excess gets put in
An investment account so i do not think that you should pay yourself first you shrink your bills first then you can pay yourself you’ll see that there’s a little bit more money in your checking account then you can go okay you have this a little bit of leeway then you can automatically transfer that into your savings account so it’s the order of doing things that
Matter i hope you enjoyed this way of thinking and not coming to thinking that as long as you pay yourself first you’re automatically gonna save more money don’t forget to give me a like on this video comment down below let me know if you’ve seen some of these videos that asked you to pay yourself first and it did not make sense to you as well if you’re interested
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Transcribed from video
Pay Yourself First Delusion By BeatTheBush