Why ‘paying yourself first’ is so important

Do you know where your money is going every month? If the answer is no, you’re not alone.

If you’re looking to build your savings and be in greater control of your finances, an effective strategy is to pay yourself first when you receive your salary.

Here are six tips to help you start paying yourself first.

Set a goal

It’s always easier to save when you have a larger goal in mind, whether that is to save for a holiday, a car, a house, or retirement.

Look at your spending habits

Look at your fixed expenses for each month, including your rent/mortgage, utilities and transport, as well as variable expenses such as entertainment and food. Deduct this from your monthly income and this will give you an indication of you how much you could potentially save each pay cycle.

Set an amount to save

Once you know how much you could potentially save each month, try and put that exact amount into a savings account on pay day. If you find it relatively easy to live off the remainder of your income, you should try and step up your savings so that you’re putting more money aside.

Set up automatic transfers

Once you’ve worked out 'the sweet spot’ for your savings, it’s worth setting up a separate account that can be used to store this money. The benefit of channelling your savings into a designated account is that you’ll able to watch it grow each month, which can motivate you to reduce your spending and increase your savings even further.

Adjust how much you save and spend

If you want to increase how much you’re putting away, look at areas where you can reduce your expenses, such as cancelling unused memberships, switching mobile providers, or finding another home loan product with a lower interest rate.

Speak to an Adviser

If you want additional assistance with your expenses and savings goals, speak to a financial adviser. They can create a tailored budget and a savings plan that can help you meet your current and future financial goals.

Talk to your local financial adviser today

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