Pay Yourself First
A savings strategy of automatically directing a portion of each paycheck to savings before spending.
What is Pay Yourself First?
Pay yourself first is a personal finance philosophy in which a set percentage or dollar amount is automatically transferred to savings, investment, or retirement accounts immediately upon receiving a paycheck — before any other spending or bills. By automating savings as if it were a non-negotiable expense, the strategy removes the temptation to spend first and save whatever is left (which is often nothing). It is the behavioral foundation behind automatic 401(k) contributions, automated savings transfers, and direct-deposit split allocations. The saved amount then grows through compound interest or investment returns.
Example
Upon each bi-weekly paycheck, an employee has $200 automatically invested in their 401(k) and $100 transferred to a high-yield savings account before the remainder lands in checking. After one year, $7,800 is saved with zero conscious willpower required.