A Guide to "Pay Yourself First"

Yesterday, President & CEO Dion Williams introduced more than 40 middle schoolers at the Jim Shaw ACE Academy to one of his favorite topics, “Pay Yourself First.” Highlights from his remarks are as follows.

Managing your money may sound boring, but trust me, it's a skill that will pay off in the future. One of the best strategies to get you started on the right path is the concept of “Pay Yourself First.” Let’s break it down using the four main categories of budgeting: Spending, Saving, Investing and Giving.

What Does “Pay Yourself First” Mean?

When you hear, “Pay Yourself First,” it means you prioritize setting aside money for your future before spending on anything else. Think of it as treating your future self to a financial advantage. It’s like putting aside a slice of pizza before anyone else gets a slice.

Four Main Categories of Budgeting

1. Spending: Spend Wisely

Spending is the money you use for day-to-day things like snacks, clothes and entertainment and should be done only after you have saved, invested and given. It’s important to spend wisely so you don’t spend all your money on stuff you don’t really need. Consider setting a limit on your spending each week and track your expenses to see where your money goes.

2. Saving: Safety Net and Future Goals

Saving is crucial for unexpected expenses and future goals, like a new phone, vacation or even college. By saving regularly, you build a safety net for yourself or as I like to say, “Pay Yourself First.” To get started, consider setting aside 10 to 20 percent of any money you receive (allowances, gifts and part-time job earnings) and set specific savings goals, giving your savings a purpose to keep you motivated.

3. Investing: Grow Your Money

Investing is your savings that grows over time, like Individual Retirement Accounts (IRAs) to save for the long-term. You don’t have to be older to open an IRA or to use only when you’re retired. When you pull your money out of an IRA, it is tax-free when used to purchase your first house. Investing may sound complicated, but starting early gives your money more time to grow.

4. Giving: Share the Wealth

Giving adds to your financial health. Sharing a portion of what you have to help others, whether it’s donating to a cause you care about or helping out a friend in need. As with saving, decide on a percentage of your money to spend on giving; and if you’re unable to donate to a charity or cause important to you, volunteer instead. Your time has value, too.

Budgeting your money with the “Pay Yourself First” mindset sets you up for a financially stable future. By prioritizing saving, spending wisely, investing and giving, you’ll have control over your money and the motivation to achieve your goals.