Pay yourself first

Earlier versions of Money used to promote the 'pay yourself first' concept through its budget. Even though it's no longer promoted due to changes in the budget, it's a worthwhile concept to maintain.

The basic concept is that when you receive your paycheck, the first thing you do is set aside an amount which is put into your savings. This should be before you pay any bills. In an ideal world, this would be taken out of your paycheck and put straight into a savings account before you see it. How much you choose is a question that only you can answer. Some people say 10%, others 20%, but if you're starting this out, try a smaller amount first. If you get a raise, then pay yourself more by increasing this amount - before you start soaking up your extra income with more purchases.

The next thing is to take care of your bills - so taxes, heating, childcare - all of the essentials, or things you have to pay.

Finally, what is left is for yourself to spend, or save on yourself which would include hobbies and anything you could live without should you need to (for example, trips to Starbucks).

Money can help with this as you can set a bill in your bills and deposits area which will regularly transfer money into savings and retirement accounts from the account you are paid into. Make sure you match this with an electronic transfer from your bank to the savings vehicle (a direct debit or standing order as we would call them in the UK). If you have automatic withdrawls for your bills too, then it's reasonably straightforward to view the cash flow and look at how much or little you have available to spend during the time up until your next paycheck.

Obviously, if you have no money at all, or have a small income, then this concept won't work. But if you earn a lot of money, then make sure the amount you 'pay yourself' is larger.

I've been using this concept for about 10 years now. It has worked very well.