Entry 45
My personal way of paying yourself first

People always talk about paying yourself first, but how do we really go about doing it?

Well for myself, I have integrated a few methods of paying myself, so to make full use of the cash that I have acquired.

The first method is the general way which everyone talks about, the 20-80. Pay yourself 20% of the money you got and the 80% are used to pay for daily expenses. I use this method on my allowance so that I can have the rest to pay for my personal expenses. When there are some months when I expect my expenses to be higher than the usual, I would cut the rate down to 10%. I usually keep the minimum rate at 10%.

For other sources of income, like the money gotten from the red packets during Chinese New Year, I would have a different paying myself plan. Here I would flip the 20-80 rule. So to say, I would pay my 80% of the money to myself and the remaining 20 will be used for indulgence. This is because the money is like unexpected cash which is not the regular cash that I got, so it’s best to save more of it. Try to keep the paying yourself minimum rate at 50% so that you can have more cash at the end of the year.

But before paying yourself first, there is one very very important thing that you must do, if not all efforts will be futile. The one and the very most important thing is to have a distinct place to put the money of paying yourself, separated from your personal expenses account. If it’s in a bank account, you should not have an ATM card or the ATM card should not be easily accessible. I personally also do this so that I will not spend the money by accident or on purpose.

Therefore, the rule of the game is to have a saving system in place and yet be flexible with it.