Many people approach budgeting in this fashion: Pay bills, spend a little, and any money that’s left goes in savings.
But those leftover crumbs aren’t often enough. Not prioritizing saving may be the reason nearly a quarter (23%) of Americans don’t have any money in savings, according to a recent financial literacy survey conducted by The Penny Hoarder. Of those surveyed, about 40% reported having less than $1,000 saved up.
One way to save more for the future is to prioritize saving over everything else when creating your budget. Some refer to this approach as reverse budgeting, while others call it the “pay yourself first” budgeting strategy. However you think of it, focusing on saving first can pull you from the rut of not saving at all and reset your approach to personal finance
What Does It Mean to Pay Yourself First?
Paying yourself first isn’t really a budget. It’s a way to reset how you handle monthly income to make savings goals a priority. Setting aside “pay yourself first” money for savings accounts can shift your mindset and help align financial goals with how you want to spend money.
Mark Charnet, founder and CEO of American Prosperity Group in Pompton Plains, New Jersey, suggests saving about 10% of your net income — the money you receive after taxes, health care premiums and 401(k) contributions are taken out — each time you get paid.
If you can’t afford to put away 10%, start smaller. The bills never stop, and
