Paying Yourself First: What, How, and Why

Don’t forget to pay yourself first. You’ve likely heard this old adage, but have you ever wondered what it actually means? And more importantly, why it’s so important? Paying yourself first essentially means placing money into savings before spending it, and there are two very easy ways to accomplish this.

Direct Deposit

If you have a direct deposit option in regards to your paycheck, take advantage of it and have a portion of your earnings deposited into a savings account while the remainder is deposited into a checking account used for paying bills. You could choose to have a percent of your earnings deposited into savings, or you could choose a set amount.

Along those same lines, having a percentage of your earnings deposited into a 401k retirement account is another great way to pay yourself while saving for your future. Trust me, your RV travel-loving 70 year old self will thank you.


Writing Yourself a Check

OK, physically writing a check to yourself is definitely a dated way of paying yourself. You could choose to withdraw cash from an ATM and either deposit it into a separate savings account or stash it under your mattress (which is definitely not advisable). You could also choose to transfer the money to a separate account via computer or smart phone. In order for this method to be successful, you will need to discipline yourself to transfer or withdraw the money as soon as your paycheck hits the bank. Otherwise, you’ll have spent your monthly savings budget on a new Summer wardrobe before you even realize what you’ve done.


Why Bother?

Have you ever looked at your bank statement at the end of the month and wondered where all of your money went? That is exactly the reason why paying yourself is vital to financial independence. It is far too tempting to overspend when you have extra money burning a hole in your checking account. It is also far too easy to mindlessly spend that extra money on lattes or margaritas if it isn’t already accounted for.

Paying yourself and not allowing that money to ever sit idle in checking is a surefire way of bulking your savings or getting yourself better prepared for retirement. Figure out which of these two methods works best for you, then start envisioning all those exotic vacations or that dream house you’ll be able to afford!

Earn Money

17 Easy Ways to Make Money Without Changing a Thing

I don’t think there’s a single person out there that doesn’t want to make more money. But let’s be real, the thought of slaving away several extra hours per week at a second job is less than appealing to most people. Wouldn’t it be great to earn more money by doing practically nothing? Surprisingly, it’s totally possible! Here are 17 ridiculously easy things you can do to make more money without barely lifting a finger.

  1. Ask For a Raise

When trying to make more money, the easiest place to start is at the job you already work at. So ask for a raise! If you’re as valuable to the company as you know you are, they should be happy to oblige. It costs employers a ridiculous amount of money to hire and train employees, so smart employers will do what they can to keep good employees.

2. Adjust Your Federal Tax Withholding

Most people look forward to a windfall every year courtesy of Uncle Sam himself. Unfortunately, this isn’t the government’s way of being generous and giving you a bonus. This is money that they took out of your paycheck all year to give themselves an interest-free loan. The fewer allowances you claim on your W-4, the more taxes will be withheld. If you claim a higher number on your W-4, you will have a smaller refund but will have more money on your paychecks each month — money that you can put away and earn interest on!

3. Online Surveys

By filling out short surveys online, you can earn gift cards or even cash. You definitely won’t get rich filling out online surveys, but if you’re consistent you can make a little extra spending money. My Survey, Swagbucks, and Global Test Market are my personal favorites.

4. Swagbucks

Swagbucks, as I mentioned in the previous section, is much more than just an online survey website. You can also surf the web, play games, and watch videos to earn money.

5. Install Data Collection Apps

There are companies out there that will pay you just to install an app on your phone. These apps analyze your phone habits: what apps you download, what websites you visit, how much time you spend on certain tasks on your phone. All you do is download the app, let it run in the background, then collect money or gift cards for letting it run. Nielsen Mobile Panel and Smart Panel are two that I have used with success.

6. Download Digit and Acorns

Digit and Acorns are apps that don’t actually make you more money, but they save money for you, making you feel like you’re making more. Digit analyzes your spending and earning habits and skims a little money here and there to deposit into a separate savings account. The idea is that by taking just a few dollars every few days, you never miss the money and you wind up saving money that you didn’t think you could save. Acorns is similar, but it rounds your transactions up to the nearest dollar then deposits the difference into an investment account for you.

7. Take Pictures

Are you always snapping cool pics on your phone? Sell them to stock photo websites!

8. Freelance Writing

Do you enjoy writing? Become a freelance writer and sell your writing!

9. Get Crafty

Remember those Pinterest DIY and craft projects you constantly pin but never get around to? Start getting crafty and sell them on Etsy!

10. Ebates

Ebates is an awesome website that I’ve been using for years. Every time I shop online, I pull up the Ebates website first. From there I find the website I planned on shopping at and click the link to that website. For example, I love online shopping at Nordstrom. Instead of typing in Nordstrom.com, I type in ebates.com, click on the link to Nordstrom, and it pulls up the Norstrom Website. I shop as normal, then Voila! Ebates sends me a check for a percentage of what I spent on my order.

11. Spring Cleaning

Start selling things around your house on Craigslist, Offer Up, or at a local consignment store. Hey, you’ll be doing your spring cleaning anyway. Why not get paid for it?

12. Lose Weight

I kid you not, there are companies that will pay you to lose weight! Now if that isn’t motivation, I don’t know what is. I recently joined Weight Watchers while they were running a promotion offering to pay me $100 if I lost 10 pounds within 90 days. (I’m happy to announce that my $100 Visa gift card is en route as we speak). Healthy Wage is another company that pays users to lose weight.

13. Start a Housesitting or Dog-Walking Business

You need somewhere to sleep, so why not get paid to sleep over at someone’s house while they’re on vacation? Or if you were already planning on going for a walk or walking your own dog, get paid to take someone else’s dog along!

14. Rent Out Your Spare Room

If you have an extra room in your home, find a roommate and charge them rent each month. Or rent it out on AirBNB for a few days at a time.

15. Switch to a Credit Union or Online Bank

Credit Unions and Online Banks tend to have much higher interest rates on checking accounts, savings accounts, money market accounts, and CD’s than your typical big, for profit bank.

16. Claim Your Unclaimed Property

Ever wonder what happens when you move and someone sends a check to you? Check with your state’s unclaimed property department (every state has one) to see if they’re sitting on some of your old checks.

17. Sell or Trade Old Gift Cards

We all have old gift cards we’ve been sitting on but never plan on spending. Like the $25 Coldstone gift card I’ve had for the last 5 years, which I’ve apparently been holding onto in case I ever decide to say a big eff you to my lactose intolerant stomach. Using websites or in-store kiosks you can either sell your gift card for money or trade it for a gift card that you’re much more likely to use.


Let’s Talk About the B Word: 4 Common Budgeting Methods

Let’s take a minute to talk about the “B word.” A word that makes grown women and men alike cringe. A word with an undoubtedly negative connotation. A word most people never want hurled at them. I’m, of course, talking about the word “budget”. I suspect most people would prefer the other B word, to be honest.

I’m not so sure why budgets get such a bad rap. I suppose most people think of budgets as restricting and a surefire way to sit at home on a Friday night with nothing to do. But in all actuality, budgets are a vessel designed to carry you where you want to be and allow you to do more of what you want to do.

Essentially, a budget is just you telling your money where to go. Many people earn their monthly paychecks, spend their money, then wonder where the heck all of their money went. But simply by paying attention to where your money goes and directing it to the right places, you can give yourself freedom that you probably never imagined was possible.

The most important piece of budgeting is obviously sticking to it month after month. But the only way to do that is to find the budget that works best for you. Below are the four most common budgeting methods.

The Zero Sum Budget

With the zero sum budgeting system you take the total amount of money that you will earn during a month and simply subtract your expenses until you end up at zero. The easiest way to do this is to start by subtracting all of your fixed monthly expenses. By fixed expenses, I mean monthly bills that cost the same each month. Your rent or mortgage, car payment, car insurance, phone bill, and minimum payments on credit cards are all fixed expenses. Then you subtract all of your variable expenses (expenses that change every month) until you get to zero, which leaves no wiggle room for those “Where did all my money go?” moments.

Cash Envelope Budget

With the cash envelope budget, you hide your credit and debit cards away and pay for everything in cash. Obviously you can pay your fixed expenses with your debit card or by automatic withdrawal, but you will only spend cash for your variable expenses. Create separate envelopes for each of those variable expenses (groceries, eating out, entertainment, clothing, etc.). Figure out your budget for each of the categories, then put that amount in your envelope (in cash, of course). If you mess up and go over in one category, you’ll have to take that money out of another envelope, thus forcing you to spend less in whichever category you’ve taken it from. If there’s any cash left in your envelopes at the end of the month, that means you’ll have a little extra for the next month to really treat yourself, or to give your savings account a little boost.

50-30-20 Budgeting

The 50-30-20 budgeting system suggests that 50% of your income should be spent on needs, 30% on wants, and 20% on savings or repaying debt. This isn’t necessarily a system I agree with, as I think 30% on wants is too high, but it could be a great jumping point if you aren’t ready to totally scale back or you don’t have very much debt to repay.

The Snowball Method

The snowball debt repayment method, which was made popular by personal finance expert Dave Ramsey, means paying the minimum on all of your debts, then throwing anything extra into the debt with the lowest balance. Once you pay that off, that minimum payment plus anything extra goes towards the next lowest debt, and so on and so forth. It’s a highly effective method and is an excellent way to gain momentum and confidence as you see the balances on your debts decrease each month.

You can take the same theory and use it for budgeting. Create your monthly budget with all of your fixed expenses, do your best at minimizing your variable expenses, then take everything that’s left over or any extra earnings and put it towards savings or debt repayment. Pretty simple.

Tips to Get Started

Before even putting a budget into place, I think the easiest way to start is by tracking your current spending habits. It is also imperative that you continue to do the same after you’ve started budgeting. For a long time I kept a spreadsheet which indicated every dollar I earned and every dollar I spent, but that was just too difficult and time consuming. Now I use budgeting apps. Personal Capital, Mint, and Clarity Money are my favorites. I have all of my spending accounts (including my credit card) linked, and at the beginning of every month I go in and check on my spending in each category. Before I began budgeting, I thought I had everything under control until I realized I was spending $300 on going out to eat, $300 on clothes, plus all sorts of other frivolous expenditures every month.

Once you’ve started tracking your spending and have a general idea of what you have coming in each month vs. your output each month, you can start to sift through what your wants and your needs are. Your wants are those things that you don’t need in order to survive. Once you’ve identified your wants, challenge yourself to spend half of what you normally spend, or even less than that if you’re feeling super motivated. If you only glean one piece of advice from this entire article, it should be to treat your savings and your retirement savings (yes, those should be separate) as a fixed monthly expense. This is what is meant every time you hear someone say “pay yourself first.”

Extra expenses, whether unexpected or planned, are a fact of life. Incorporate those into your budget as well. If you know your 6-month car insurance premium is due this month, write that into your budget and tighten the belt in other areas. If you know you’re going to attend a fancy dinner for your best friend’s birthday, by all means include that in your restaurant budget. Just make sure you take that out of your vacation or clothing budget that month.

Budgeting isn’t a way of making you needlessly suffer, as so many people seem to think. Rather, it’s a way for you to learn to prioritize areas of your life so that you have more resources for you to do or own the things you love most. If you resolve to give it a shot and stick with it for even just a few months, I can guarantee you won’t look back and regret it.