Pay yourself first: what this strategy is and how to follow it

Managing your finances can be difficult, especially if you worry about having enough savings for those life-changing decisions. 

One strategy to consider is ‘pay yourself first.’ Here, you set money aside for various things, such as savings, retirement or even investments, before you pay your monthly bills. 

This can be useful for those who struggle to save. 

What is the pay yourself first strategy? 

The pay yourself first strategy prioritises saving money for specific financial goals, such as retirement or an emergency savings pot, and then paying your bills. 

Traditionally, you would have a budget focusing on paying your monthly bills before setting aside anything for your savings goals. This strategy turns that tradition on its head.  

When you adopt this strategy, it’s common to automatically send a set amount to contribute each month to a savings account, pension or emergency fund so it doesn’t ever reach your current account. 

Paying yourself first can help curb your spending to help establish funds for the future, as you won’t have access to your money on payday.  

You can also be flexible with this strategy. You can vary the amount you choose to save in relation to your goals and take into account changes in your circumstances, such as a pay rise or temporary reduction in salary.  

However, it’s worth stressing that if you have any debt, you should prioritise tackling it first instead of saving, as the interest rate can be notoriously high.  

How can I adopt the pay yourself first strategy? 

If you want to pay yourself first, these tips can help. 

• Review your debt: If you have high-interest debt, it’s worth clearing this as a priority, as it can build up quickly. So, ensure you make at least minimum payments each month.
• Establish a savings goal: Having a clear goal to work towards will help you commit to saving. Popular goals include building an emergency fund (worth three to six months of monthly spending) or retirement savings. You can also save towards a wedding, a big holiday or urgent repairs. Some banks allow you to split funds over many savings pots.
• Determine how much you can afford to save: Once you’ve paid for groceries, household bills, insurance, transport, your rent/mortgage, and discretionary spending, you can find out how much you can afford to save. Even if it’s only a small amount, this can grow.
• Automate your savings: To avoid the temptation of spending, you can automatically move your money from your current account to a savings account. Some autosaving apps can even figure out how much you can afford to save and move it for you.
• Focus on retirement: You can contribute to a workplace pension, which your employer also pays into. Some employers will boost the amount they contribute if you increase how much you pay each month.  

It’s also worth reviewing savings goals regularly and how much you contribute. 

For example, if you build an emergency fund with three months’ expenses, you might consider focusing on another goal. 

Alternatively, if you get promoted or receive a bonus, you may consider increasing your savings with a regular or one-off payment.  

Pay yourself first: what to consider 

Before paying yourself first, always prioritise your debts and bills, as missing payments can impact your credit score and your ability to borrow in the future.  

You should also make sure you get the right savings account for your needs and shop around for the best interest rate, so you get the most out of your money.  

Once your savings start to grow, resist the temptation to spend it.  

If you prefer instant access to your money, an easy-access account is worth considering, although regular savings accounts can offer the best rates if you contribute monthly.  

Seeking financial advice

Considering investing? You should do your research to ensure that your investment strategy matches your risk appetite and goals.  

Saving for the future can be daunting, but it doesn’t have to be. 

Unbiased can quickly connect you to a financial adviser who can support you with your goals, whether you’re starting your investment journey or planning for retirement.