Heres why you should pay yourself first

Heres why you should pay yourself firstHeres why you should pay yourself firstYouve probably heard pay yourself first a lot. Ive said it many times on social media and to my clients. But do you know what that actually means? Im here to teach you, while also explaining how and why you should do it.Follow Ladders on FlipboardFollow Ladders magazines on Flipboard covering Happiness, Productivity, Job Satisfaction, Neuroscience, and moreWhat is paying yourself first?Paying yourself first means that when you get paid, you first pay all your bills (including debt), then you contribute to retirement, and then you put money into savings (or towards other goals). After youve completed all those steps, you can then start spending money on other things like groceries, entertainment, gas, etc. This is called paying yourself first because youre putting your money towards your own goals and priorities before doing anything else with it.Why should you pay yourself first?We tend to pay all of our bi lls, spend our money on things we need and want, and then save what is left over. Unfortunately, that process isnt very effective. Why? Because theres usually nothing left If you pay yourself first, all your bases will be covered up front, and you can spend what you have left without worrying or feeling bad about yourself. This makes it easier and more likely that you will reach yourfinancial goals because youre prioritizing them.How can you pay yourself first?1. Create a budgetIve said it a million times before, and Im saying it again you need a budget. And it should be a budget that works for you (find out how to do so here). Your budget will map out all of your expenses and income, so that you can figure out how much you have available to put towards your goals. From there, you can choose the number(s) that youll pay yourself first.2. Take advantage of pre-tax offeringsMany employers offer a retirement savings option, like a 401k or 403b. If (when) you opt into that offering, you r employer will deduct the amount from your paycheck before taxes are taken out. This is beneficial for two reasons your taxable income is lower and you dont have to think about contributing to your retirement. Plus you often get a match from your employer, which is free money There are other pre-tax options, too, like contributing to a health savings account or a metro card. Take advantage3. Automate when possibleI cant stress this enough. Automation is key. You dont have to think about moving your money, and it becomes a habit, so you dont miss the money as much. Youre also way more likely to actually save when you automate it (because you cant spend it first). So set up direct deposit from your paycheck into a savings account, or set it up so that your bank moves your money for you. Youll be surprised how quickly your savings will grow when you do this.4. Reassess oftenSometimes, your circumstances change, whether for better or for worse. If you get a raise, you can pay yourself more Which means you can increase your retirement contribution, debt repayment, or savings amount. By doing this first, you can avoid income creep, and reach (or surpass) your goals faster. On the other hand, if you lose your job, or make a change that results in less income, you may have to lower how much you can save. You want to be conscious and realistic of what you can afford, and make adjustments as necessary. So make sure you reassess your situation whenever things might change.How do you pay yourself first? Has it worked for you? Share in the commentsThis article first appeared on MaggieGermano.com .