From Struggling To Saving: Why And How You Should Pay Yourself First

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Why And How You Should Pay Yourself FirstThe first time I heard about the ‘Pay Yourself First’ principle was in 2010. I even wrote about it on my Dutch blog. At that time, I was reading a lot of books about earning and saving money, looking for principles that I could apply in my daily life. I devoured debt-free blogs and stuff from motivational speakers like Suze Orman and Dave Ramsey.

I was struggling

It wasn’t so much about getting rich, it was more about suriving. At that time – I was 26 – I was up to my eyeballs in debt. Mortgage debt, which made it seem a bit less bad at the time, but it really wasn’t. I owed the bank more than 400,000 euros and if that wasn’t enough, the house I loaned it for was kind of a money pit. The renovation cost a fortune and it never seemed to end. Money was going out faster than I could earn it. The mortgage payments alone were about 2500 euros a month and renovation would also often add up to another 1.500 a month. And even though business was doing well when I bought the house, the crisis hit me hard only a few months later.

I just got a 400k mortgage when the crisis hit me. Real hard.

Save, save, save

I could have sold the house, but I loved it. So I did what I do best: make my money stretch just a little further. I made my own laundry detergent, grew vegetables, and I looked for ways to save more. One day, I read about Pay Yourself First and it clicked: you shouldn’t save what you have left at the end of the month, you should save first and make do with what you have left. Pay Yourself First is about paying yourself a salary, before you make payments on anything else. This ‘second salary’ is used for savings.

I created automatic payments into my savings account, that would be activated everytime my salary was due. So before I could even try to feel rich, the money would have been gone from my regular account.

Before I could feel rich and spend, I would put money into my savings account

How to Pay Yourself First

I think Suze Orman, who is a strong advocate of this method, advises people to start with 10%. First, I started with that, but since I really needed a tonload of money, I started to look for ways to increase it. I created a budget that would leave me no room for unbudgeted stuff. This helped me to get my savings percentage up to 30% easily. And now, almost seven years later, it still is a habit and I managed to get that percentage up to 38%.

The key is set a target and create an automated transfer into your savings account, the day after your salary is paid. That way, it will seem as if you never had it in the first place. It’s just that simple.

The next step

Last year, I sold my house and money isn’t as tight as it was. And even though I’m still saving a lot, my budgets aren’t as tight as they used to be. That is a bit of a shame, since we are saving up for a new house and I would love to be able to pay that in cash. No mortgage, no loan, no nothing. Therefore, I’d like to work on increasing my savings percentage in the next few months. The first step is increasing it by 5% to 43%. My goal is to do this for June, July and August. After that, I will look at another increase.

5% might not seem like a lot, but that’s just it: it is an attainable goal, that will make a lot of difference in the long run.

I am curious: do you pay yourself first, or do you only save what is left of your income? And: do you want to join me in this tiny challenge to increase your savings as well? Let me know in the comments!

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Adine @ Average To Awesome

33-year old Dutchie with a passion for minimalism, doing more with less, and financial independence. And cats. Lots of cranky old cats.

3 Comments
  1. Hello from America, Adine!

    My church, The Church of Jesus Christ of Latter-day Saints, has always preached “Pay the Lord first, then yourself.” Suze Orman also supports this. I have been a part-time tithe payer on and off, with some full-time years, since I became a member of the church. Because temple worthiness is dependent on paying “a full and honest tithe,” I decided to do exactly what you did. I set up a savings account to put my tithe in before it hit my checking account. So of course, as January goes on, our sewer pipe freezes, with the damages costing us $600.00. The workers want a show of good faith before they will fix anything, so I take $50.00 out of my savings account. I live on around $700.00 a month I receive for Social Security Disability, and a small pension my husband receives. It pays the bills. I spoke with the Bishop of my ward, and explained to him how I wanted to start paying a full tithe ($70.00), but I had to take $50.00 out for a down-payment to have the sewer line fixed. He was very supportive, and said “That is why I pay my fast offering.” He offered to pay the rest of the money to fix the sewer line from the fast offerings collected in my ward.

    I have a testimony of setting aside %10 as a tithe or charitable offering. Someone explained it to me this way: “Wouldn’t you rather have %90 of your income and the Lord’s help, than have %100 of your income to deal with on your own? Not saying we can’t or don’t make smart decisions on our own, but it’s easier to fudge if you’re not accountable to someone – or THE One.

    Have a happy, prosperous, and blessed New Year,

    Janet Wise

    1. Hi Janet,

      Thanks for your message and for sharing your experience. And it is definitely something to consider: what would you rather have, 90% of your income and the Lord’s help, or 100% of your income and being at it alone. I actually just received the letter from the church for my annual ‘donation’, and I wasn’t really sure what to do with this, but your message has shed some clarity. (Tithing isn’t really common here in our church, but giving and sharing the wealth you have is of course something that is part of what we believe in).

      I’m glad to hear that everything worked out with the fixing of the sewer line and that the church was able to support you in that way. I also wish you a happy, blessed and of course prosperous New Year!

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