Pay Yourself First: Things I learnt and work on

The biggest takeaway for me from the richest man in Babylon was the concept of “Pay Yourself First”. And how it can help me achieve my financial goals. The book explained that “Pay Yourself First” means setting aside a portion of your income for savings before spending it on anything else.

Reading our review of the book, The Richest Man in Babylon which opened my eyes. I thought learning about money would happen later when I started earning later in life. Money is not something I should be bothered about as a kid, I had this wrong idea in my head which was shattered by this review of the book.

I am very excited to get my pocket money. I’m even more excited to receive money for doing odd jobs like doing a project for other children. And I’m really want to buy a bike from my own money.

But the bike doesn’t come cheap. I have to save for many months before I can get the bike.

But at the end of every month, there’s no money left. All my money gets spent even though I continuously remind myself to save. Something or the other keeps coming up as I see something shiny at the mall that I have to buy.

Without blinking, I spend my savings. While it gives me a high, and I feel proud to have bought it with my own hard-earned money. However, at the end of the month, I realize that’s there’s no saving for that bike.

For every 100 bucks that I get, I need to take out 10 (atleast) before spending.

Here’s a story that explains the concept.

Charlie and Dana are best friends who go to the same high school. They both get $100 a month as allowance from their parents and have similar hobbies and interests. However, they have different approaches to saving money.

Charlie follows the pay yourself first method. He sets up a piggy bank where he puts 10% of his allowance ($10) every month, before spending any money on other things. He has a goal to save up for a new bike, a college fund, and a charity donation. He uses the remaining 90% ($90) for his fun expenses and wants.

Dana follows the traditional budgeting method. She spends her allowance on her fun expenses and wants first, such as snacks, movies, games, and clothes. She saves whatever is left at the end of the month, which is usually not much. She has a piggy bank, but no specific goal or purpose for her savings.

Practice what We Learn with worksheets & Questions

Having understood the concept theoretically, it’s a question of applying it in our lives, right? Theory and practice must be combined to be effective.

1. Budgeting Worksheet: I have to create a budget for my weekly or monthly allowance, with a focus on “paying themselves first” by saving a portion of my income.

2. Reflection Questions: I have to write an answer to questions, such as “What did you learn from Dana’s mistakes?” and “How can you apply the concept of ‘paying yourself first’ to your own life?”

To practice this concept in your life, you can follow these steps:

• Evaluate your monthly income and expenses. You need to know how much money you earn and spend each month, and what are your fixed and variable expenses. You can use tools to track your spending and categorize it by needs and wants.
• Identify your savings goals and commit. You need to decide how much you want to save each month, and for what purpose. You can use the 50/30/20 rule as a guideline, which suggests saving 20% of your income, spending 50% on needs, and 30% on wants. You can also adjust this ratio according to your situation and preferences. You should have a clear goal for your savings, such as retirement, emergency fund, education, or travel.
• Set up automatic transfers or deposits to your savings accounts. You need to make sure that you pay yourself first before spending money on anything else. You can do this by setting up automatic transfers from your paycheck or bank account to your savings or investment accounts. This way, you don’t have to worry about forgetting or skipping your savings contributions. You can also choose the frequency and timing of your transfers, such as weekly, biweekly, or monthly.
• Review and reevaluate your plan regularly. You need to monitor your progress and adjust your plan as needed. You can check your savings balances, review your spending habits, and celebrate your achievements. You can also change your savings amount or goals if your income or expenses change, or if you have new priorities or opportunities.

By following these steps, you can practice the pay yourself first concept in your life and enjoy the benefits of saving money and achieving your financial goals.

I invite you to work on the above worksheets and reflection questions too. I’ll be happy to hear from you and we can help each other learn.

Maybe you can write a short story or a poem on money! We can put it up on this site for all others to appreciate!!

I’m curious if elders also need to practice this concept as much as we kids need to.

In any case, please share your thoughts in the comment box below.