Why Do You Need to Pay Yourself First?

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Have you ever been in a situation where you have wanted to buy something but you have not been able to afford it? We've all experienced that from time to time – and some of us experience it more frequently than others. But this is where thinking and planning ahead can both help you to reduce the number of occasions where you can not afford what you want or need in life.

Building up a pot of savings is a good idea for everyone. While starting to put money away regularly may feel feel odd at first, it does feel good to know that you have an ever increasing pot of cash to rely on if you need it.

This is where the concept of 'paying yourself first' comes in. As it goes, many people focus on everything but saving money. Obviously it is important to pay the bills, but building up those savings is just as important – both for the long and the short term. You never can tell when you might need some extra cash.

So, what you need to do is to allocate an amount of money to pay yourself each week or month. This will go into savings account and start piling up for the future – often the best time to do this is just after you have been paid. An automatic transfer is the best way to do it, that way you will not need to remember to do it manually all the time.

You need to make sure the amount is a realistic one; it's no good putting a huge sum away if it will leave you struggling to make ends meet for the reminder of the month. Therefore, choose a reasonable amount; you can always adjust it at a later stage if need be.

Another thing to think about is the type of account you want to open. A standard savings account may seem ideal but it may not offer you the best rate of interest. Think about whether you will want to have access to your savings on a regular basis or not, and pick the appropriate account accordingly.

Of course, you can also split your monthly savings between two or more accounts. For example, a standard account would give you easy access should you ever need it. And you can open another account that pays a much better rate – such as a Cash ISA – to squirrel some money away for the future as well.

In short, by planning ahead and paying yourself before you treat yourself, you can look forward to a much more prosperous future.