QUESTION: How to use the "pay yourself first" rule?

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The "pay yourself first" rule is one of the most effective personal finance management strategies that turns the traditional approach to savings upside down. The traditional scheme, where a person tries to save what is left of their salary at the end of the month, usually does not work because, with funds readily available, the money always goes toward current expenses.

The essence of the method is that immediately after income is received, you transfer a strictly fixed percentage to your savings or investments. You can spend the remaining amount on daily life, utilities, and entertainment without feeling guilty. To implement this strategy, it is recommended to follow a few simple steps.

1. Determine a comfortable percentage for savings, for example, ten or fifteen percent of each income source, and set up automatic deductions in your mobile banking app.
2. Distribute the funds remaining after the transfer into categories of mandatory and variable expenses to clearly understand your monthly limit.
3. Treat these savings as a mandatory non-existent payment, just like apartment rent or a loan payment, which cannot be canceled or missed.

Using this rule guarantees that your capital will grow regardless of your level of discipline during the month. Even if you have slightly less money left for entertainment, you will develop a useful financial habit of regularly replenishing your reserve fund. Over time, this percentage can be increased, which will allow you to build up large savings faster for important life goals.

QUESTION: How to use the "pay yourself first" rule?

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