Most people save like this: spend all month, then save whatever survives. The problem is that nothing ever survives. There is always one more thing.

Flip the order

Paying yourself first means the transfer to savings or investments happens on payday, before the spending starts. Treat it like a bill that cannot be skipped, because the person it pays is you.

  1. Pick a starter amount or percentage you can hit even in a rough month.
  2. Automate the transfer for the morning your pay lands.
  3. Send it somewhere slightly inconvenient to raid: a separate savings account works.
  4. Raise it a little every raise, bonus, or paid off bill.

The amount matters less than the order. Small and first beats big and someday, every single time.

Case study

Case study: Sharon Epperson, CNBC

In our own words. Original story linked below.

Who
Sharon Epperson, CNBC senior personal finance correspondent and host of Retire Well.
Starting point
Epperson said her biggest obstacle was figuring out how much money she should be saving.
First moves
  • Made pay yourself first her number one budget commandment.
  • Created separate savings accounts for different goals, started putting 20 percent of her pay into 401k and retirement accounts and 10 percent into short term savings.
  • Had money automatically directed from her paycheck to a savings account that was not tied to her checking account.
What worked
She said she still mostly sticks to those goals. She later described a related 60 percent solution for committed expenses, with 20 percent to long term savings, 10 percent to short term savings, and 10 percent as fun money, which helped her family juggle a home and raising two children.
What to copy
Set the saving transfer to happen automatically on payday, before discretionary spending. Keep the savings account separate from everyday checking so it is harder to dip into casually. Start with a fixed percentage, even if it is smaller than Epperson's, and raise it by 1 or 2 percent over time, as she said she tries to do.
Watch out
Epperson's 20 percent plus 10 percent starting split is her own plan, not a universal target, and it may not be realistic on a tight or variable income. She also does not use the exact 50/30/20 rule, so do not present her as a 50/30/20 case. Her story is a pay yourself first case.
Source
Nasdaq, This Expert Doesn't Use the Popular 50/30/20 Budget Rule
Takeaway: If saving is what is left over, it will always be nothing. Make it first.