Who gets paid first out of your paycheck? For many people, it's the landlord, the phone company and the car insurance, and savings gets whatever's left at the end of the month, which is often $0.
Paying yourself first switches the order. On payday, money goes to your savings and investing accounts before anything else, and the bills and spending come out of what's left.
This guide covers how much to set aside, how to set it up in four steps so it happens on its own and the downsides to watch for. If you like money habits explained simply, join our free investor livestream on November 17, where CEO Jaspreet Singh shows how to use ChatGPT and Claude to research stocks like a pro.
What pay yourself first means
The Climb to Wealth class describes two ways money can move. In the common one, you get paid, you spend, and then you invest whatever's left, if there is anything.
In the other, you get paid, you save and invest first, and then you spend what's left. The class says that second way is how wealthy people handle money, because it means there's always money to invest.
Both Experian and Wells Fargo explain the same basic idea. The main difference from saving what's left is timing: the money moves on payday, not at the end of the month.
Think of savings as a bill you pay to yourself. Rent gets paid on the 1st whether you feel like it or not, and your savings transfer works the same way.
How much should you pay yourself first?
How much should you move on payday? At least 10% for savings and at least 15% for investing, using the 75/15/10 split Briefs teaches, which leaves at most 75% for everything else.
Say you take home $1,500 a paycheck, twice a month, for $3,000 a month:
| Each payday | Share | Amount |
|---|---|---|
| Savings | 10% | $150 |
| Investing | 15% | $225 |
| Left to live on | 75% | $1,125 |
Over 24 paychecks, that's $3,600 saved and $5,400 put toward investing. At $150 a paycheck, your savings reach $2,000 after 14 paychecks, about seven months.
That pay is an example, not an average. These are only the amounts you put in, not a guess at what the investing part might grow to.
How to pay yourself first, step by step
The Climb to Wealth class teaches three steps in order: save your first $2,000, pay off credit card debt in the right order, then automate the whole thing so you're not relying on willpower. Paying yourself first is that automate step, and you set it up in four parts:
- Pick your amounts from the split. At least 10% for savings and at least 15% for investing, based on your take-home pay.
- Choose where each part goes. The 10% goes to a savings account, often a high-yield savings account, and its first goal is to save your first $2,000. For the 15%, Briefs explains how much of your paycheck to invest.
- Automate it on payday. Split your direct deposit, or set an automatic transfer for the day you're paid.
- Live on what's left. Build your budget around the 75%, not your whole paycheck.
Investing involves risk including loss, and past performance does not indicate future results.
The class suggests three separate bank accounts: one for spending, one for saving and one for investing. If your savings has its own account, a Saturday trip to the mall can't use it up by accident.
Many people send the investing part to a 401(k), a retirement account you get through work. Investing the same amount on a regular schedule like this is called dollar-cost averaging, and Briefs covers how to start investing with $100 or less if your 15% starts small.
What if you still have credit card debt?
If you're carrying card balances, the class order is to save your first $2,000, then pay off credit card debt in the right order. Your 10% builds that cushion first, so the next surprise bill doesn't go back on the card.
After that, extra card payments come from cutting your lifestyle spending, and the guide on how to pay off credit card debt lays out the plan. Briefs also explains why the emergency fund comes first.
The downsides of paying yourself first
The biggest risk is setting the amounts too high. If you come up $200 short for rent on the 28th, that $200 goes on a credit card, and you're worse off than before.
It can also feel tight for the first few months, because everything else now has to fit in 75% of your pay. Your first budget may need a few changes, like one less takeout night a week or a cheaper phone plan.
One way around both is to start smaller and raise the amount over time, which Experian and Wells Fargo both suggest when money is tight. You could start at 5%, then move toward 75/15/10 as you cut costs.
One call to negotiate your bills can help you get there faster, and so can canceling subscriptions you forgot about.
Pay yourself first and the bigger picture
Once your $2,000 cushion is saved, the same 10% keeps going, now toward a full emergency fund. You don't have to change anything about your setup.
It's also one of the most direct ways to stop living paycheck to paycheck. And it keeps money going toward things that can grow over time, which Briefs explains in what wealth really is.
Does paying yourself first really work?
It works because you only make the decision once. After the transfers are set up, the money moves every payday, and you never have to talk yourself into saving at the end of the month.
- Move at least 10% to savings and at least 15% to investing on payday.
- Automate the transfers so they happen on their own.
- Live on the 75% that's left.
Once the transfers are set, saving and investing happen every payday whether you think about them or not. Briefs covers the rest of managing your money, from budgets to paying off debt.
To decide where your 15% goes, join our free investor livestream on November 17, where CEO Jaspreet Singh will show how to research stocks with ChatGPT and Claude.
