The Ultimate Money Hack: Pay Yourself First
The best-known money hack of all time is simply to pay yourself first. Every time you receive money, set aside a portion (many people set aside 10%) for personal investment. Put this money into a savings account, a certificate of deposit, or some other form of investment. Never touch it. Do this on a regular basis and you will accumulate wealth.
The key to this hack is to actually set the money aside before you can spend it. In order for this to work, you must make it a priority to literally pay yourself first.
In The Automatic Millionaire, David Bach details how to remove all temptation by making this saving forced. 
Chapter three is entitled “Learn to Pay Yourself First”. Chapter four is “Now Make It Automatic”. The entire book offers advice to make this happen.
One of the easiest ways to begin to pay yourself first is to take advantage of a salary increase. The next time you get a raise, don’t give in to lifestyle inflation. Instead, take that pay increase and sock all of it into savings. Think of this as a gift, a free chance to implement this money hack.
Many of us know this hack. Many of us preach it. But how many actually put it into practice?
[Read more at Get Rich Slowly — Pep talk: Pay yourself first]
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Elissa said,
February 1, 2007 @ 3:11 pm
I found out about this “hack” 2-3 months ago. I can’t believe I didn’t find out about it sooner! It makes SO much sense!
I’ve had an ING Savings account for about 4 years, but I could never seem to keep money in it and the most I’d have in there at a time was $300 (for a poor college student it seemed like a lot). I think I earned $7 in interest for the entire time I had the savings account.
Then I heard about the “pay yourself first” theory and decided it’s something I should at least TRY. I felt like there was no way I could afford to pay myself each pay period, but I figured it wouldn’t hurt to try and I could always take the money out if I needed to.
So I logged on the ingdirect.com for the first time in a long time… so long that my account (which had $0 in it) had disappeared! So I re-opened it and started fresh at the end of November. I was fortunate enough to have $200 I could spare from my checking account (first time in a long time that that has happened), so I put it into my savings. And for the month of December I told myself I was going to take 12% (higher than 10% but not as scary as 15%) from each paycheck and pay myself, so that ING can pay me for paying myself. And I did it. Once the paycheck hit my checking account, I did the math, logged on to ING and transferred that 12%. It feels really good. REALLY really good. So good that I did it for the entire month of January as well. And I plan on doing it again in a day or two once my paycheck hits my checking account.
As a 23 year old college grad with student loans, credit card debt (complete with collection calls), and those oh-so-expensive bills, being able to pay myself (aka put away) 12% every other week gives me hope. It reminds me that while I may not be in the best financial shape, I’m not totally hopeless.
Bill Hutchison said,
February 1, 2007 @ 10:06 pm
When I got my first job after high-school I set up an automatic debit system on my account to take out $100 a month and put it into a savings as soon as I got paid. It worked pretty well for me.
I did that for a few years and then started to save to move to Australia. At that point I changed it to take out $750 a month! That was nearly half of my pay at the time, but because the money wasn’t there to start with (didn’t use credit cards at the time) I didn’t have the opportunity to spend it. Even though that was a tough 6-months of savings, it paid off big time in the end.
It sounds hard to do when you first look at setting it up, but it sure can pay dividends.
Frame Hacker said,
February 4, 2007 @ 8:43 pm
Alissa–
Thing 1: Deal with the collection agencies/credit card issue first, if you can. The penalties and interest will eat you alive! and may quickly exceed the original debt you incurred. I’ve seen a relative of mine get a $1K debt that turned into $6K because she stopped paying on it for a relatively short while… If you have several cards, read up on snowballing payments as a way to pay your debts. It works, believe me.
Thing 2: Once the collection wolf is no longer at the door, better than putting the money in an ING account is putting at least some of it in a 401K where you work, if it’s offered. most companies offer a free match for at least some of the money you put in the 401k– think “instant guaranteed return on investment”. (i.e. if you put in $100 a month, your employer may also throw in $50 or $100– sure beats the $5 a year you’ll see on it at ING.) Also, you won’t have the temptation to touch the money, ever, because you basically can’t– not without big penalties, anyway. So you’re saved from yourself.
Finally, I’m not 100% sure on this but it may well be that collection agencies can’t touch money in retirement accounts. So if you can shield some money there, so much the better. 
Best of luck…
Elissa said,
February 5, 2007 @ 4:16 pm
Frame Hacker,
Thanks for your advice, I really appreciate it. As for the credit card issue, that’s already about as far gone as it can get. And I’ve also done an immense amount of research on debt repayment. I’ve even called a debt consolidation company for a free consultation (don’t worry, I’m not actually going to fall for the consolidation scheme) to get an information I could. The original debt has accrued as much interest as possible and now it’s just a matter of writing individual letters to each debt collector, requesting to take them up on their “lower balance” (pretty much canceling a fair amount of interest that has accrued) payment in conjunction with my detailed, dual-sided, snowballing repayment schedule. I’m fairly confident that it’s thorough enough to work, even if they will not offer me the “lower balance” with my suggested repayment schedule.
As for the 401K, I’ve also been researching that plenty also.
I’ve also been trying to read up on IRAs, but I still haven’t got my brain wrapped around it quite yet. I need to have a chat with our Operation Manager, but from what I recall my company requires 6 months of staff employment before you can start a 401K. My 6 months will be in May, at which point I’m fairly certain I will be able to contribute to both my ING and 401K. And the thought of that makes me very very happy. 
English Major said,
February 14, 2007 @ 12:50 pm
One thing I find helpful in re: the necessity of paying yourself actually, chronologically first: I set the autotransfer from my checking to ING for the day before I actually get paid. That way, the funds are actually debited from my checking account on payday, rather than two days later (or worse, on Monday).
DC said,
February 20, 2007 @ 5:29 pm
Paying yourself first if you have substantial debt is a bad idea in my opinion. You pay yourself and put it in a CD that yields, what, 4%? In the meantime you have credit cards that are accruing interest at 15%. See the disconnect? Pay high interest debt first THEN pay yourself. Otherwise you will always make less than you owe.