- Saving

This Simple Strategy Can Make Anyone A Millionaire—Why Not You?

Want to spend ten minutes doing one thing for your finances that will have an absolutely MASSIVE impact on your ability to spend less, save more, and reach your goals faster?

If you answered yes, then it’s time to pay yourself first.

The concept is simple: Every payday, the very first thing you do is set aside a percentage of your income in a savings account. You do this before you pay the rent, before you pay your other bills, and before you head to happy hour. You “pay yourself first.”

The strategy is simple, sure. But it’s powerful because:

It puts saving first

Something amazing happens when you tell yourself you’re going to set aside money for yourself and that it’s more important than all the other things that need to be paid. Once you get used to the idea-and see your savings start to accumulate-it becomes kind of addictive. The more you save, the more you’ll want to save!

It’s automatic

Once you set up an automatic transfer or split direct deposit in your savings account, you can stop replying on yourself to save money instead of spend it. (Just like me, you’re human, and we humans tend to be bad at stuff like that.)

How paying yourself first works

There are two primary ways to pay yourself first automatically:

Automatic Transfer

Most banks (and all online savings accounts) allow you to set up automatic recurring transfers between accounts. You pick the amount you want to save, the date on which you get paid, and the bank takes care of the rest. For example, if you get paid every other Thursday, your savings bank will automatically debit your checking account on the same day your paycheck hits.

Split Direct Deposit

If you want an even more tamper-proof method, you can ask your HR department to split your direct deposit between your checking and savings accounts (most payroll providers can do this). I say this is more “tamper-proof” because if you were ever tempted to stop paying yourself first, you would have to visit your HR office to cancel the deposits into your savings account.

Note: I highly recommend keeping your savings account at a different bank than your checking account. (Otherwise, it’s just way too easy to commingle your funds.) Online savings accounts are great for this because they provide better interest rates and 2-day transfers back and forth to other banks. You can set them up and forget that they’re there until you really need your savings.

If you’re in debt…

A common question I get is “I have high-interest credit card debt or student loan debt, shouldn’t I be paying that off before saving money at a measly one percent interest?” I say YES. And here’s why:

Obviously if you’re in credit card debt, getting debt-free is your financial priority. That said, I think that everybody needs to do two things:

Create a Bank Account Buffer™.

To prevent overdraft fees and the temptation to use credit again for life’s little surprises, you’ll want to create a small cushion of cash in your checking account, something we call a Bank Account Buffer™.

Related: How Much Should You Be Saving In an Emergency Fund?

Develop a savings habit

Even if you’re paying off credit card debt, pay yourself $10 a paycheck. Then, when the debt is gone, you’ll already have the habit in place and can up the amount you save considerably.

Related: Should You Save or Pay Off Your Student Loans Early?


Take it from me: Paying yourself first really works. It takes 10 or 20 minutes to set up, and then runs on autopilot. If you do nothing else to improve your finances, this would be the thing to do. You won’t regret it!