What does the term 'pay yourself first' imply?

The concept of "pay yourself first" is a fundamental principle of personal finance that emphasizes the importance of saving a portion of your income before addressing any other expenses. This approach encourages individuals to prioritize their savings as a non-negotiable expense, much like a bill that must be paid each month. By doing so, individuals can build their savings and create a financial cushion for emergencies, future investments, or retirement.

When you pay yourself first, you typically set aside a certain percentage of your income immediately upon receiving it, ideally directing this money into a savings account or investment vehicle. This habit helps ensure that saving becomes part of your financial routine, lessening the temptation to spend all your income on variable expenses like entertainment, dining, and shopping.

This method is particularly effective because it cultivates a mindset of financial responsibility and long-term thinking, promoting delayed gratification in favor of building a secure financial future. Prioritizing savings in this way can lead to better financial stability and increased wealth over time.