You’ll probably see all kinds of budgeting methods floating around the internet, but one that is especially favorable with experts is the “pay yourself first” method — a personal finance strategy that emphasizes prioritizing savings and investments before addressing other expenses.
Basically, you treat your savings like an expense that you pay first each month. This ensures that you’re setting aside money for your financial goals before spending on any other discretionary items or bills.
“When you pay yourself first, you treat saving money as a nonnegotiable expense,” said Michelle Troha, chief marketing officer of First Florida Credit Union. “Before spending a single dollar, you automatically deposit a portion of your paycheck into savings — no excuses.”
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She said the amount can be large or small, and it doesn’t have to be the same every time. The key is consistency. When you prioritize saving, your savings grow. Paying yourself first will also bring you closer to other financial goals or resolutions, Troha said. Whether you’re saving for a car, a home or an emergency fund, automatically setting money aside increases your chances of reaching your goal.
“Plus, it creates a financial safety net for unexpected expenses down the road,” she said.
Here are more ways this method can help you stick to your goals in 2025.
Automate Your Savings
Paying yourself first looks different for everyone, according to Troha. She said the easiest way to ensure you are saving money every month is to automate your savings.
“When you automatically transfer a set amount, it actually simplifies your budgeting as well. For example, if your paycheck is $2,000 and you automatically save $100, you mentally adjust your budget to $1,900, helping you manage expenses without thinking twice,” she said.
Jessica Wright, owner of Cash For Houses Tennessee, has used this approach successfully. “As someone who’s built wealth through real estate investment, I’ve used the ‘pay yourself first’ method to grow from a single property to a diverse portfolio,” she said. “I started this practice when I bought my first investment property 10 years ago, and it’s been crucial to my business growth.”
She said this method revolutionized her real estate investment journey. “When I started, I struggled to save for property down payments because I waited to see what was left at the end of each month,” she explained.
She said everything changed when she began automatically transferring 30% of her income to a separate investment account on payday. “Last year, this strategy helped me purchase three properties because I had reliable, consistent savings ready for opportunities,” she said.
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Strengthen Financial Discipline
Beyond boosting your savings account, Troha said this method strengthens financial discipline. “Knowing that you have $50, $200 or $500 less than your paycheck will force you to prioritize what is really important,” she said.
It can be as simple as eating out less or avoiding the shopping mall on the weekend.
Purchase Your First Home
This method can also help you get closer to achieving big financial goals, like buying a house.
“My experience with clients shows this method’s power for building real estate wealth,” Wright said.
One couple she advised started automatically saving $500 monthly toward their first home purchase. After 18 months, they had enough for a down payment on a starter home, which they’ve since turned into a rental property.
“They credit their success to never seeing that money in their checking account — it went straight to savings before they could spend it,” she said.
Remove Decision Fatigue
According to Wright, the psychological impact of paying yourself first transforms financial habits too.
“When I teach new investors, I emphasize how this method removes decision fatigue. You’re not constantly choosing between saving and spending — the choice is already made,” she said. “One of my mentees automated his savings in January 2024 and told me last week that it was the first time he’d stuck to his financial goals past February.”
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This article originally appeared on GOBankingRates.com: How the ‘Pay Yourself First’ Budgeting Method Can Help You Stick to Your 2025 Goals
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