Understanding ‘Pay yourself firstUnderstanding ‘Pay yourself first

Author of ‘Practical Steps to Financial Freedom and Independence,’ Usiere Uko, writes about how you can pay yourself first

The concept of pay yourself first is foundational to building financial security and independence. The steps to financial independence can be summarised into two – spend less than you earn and pay yourself first. Both work hand-in-hand. Paying yourself first will not work unless you spend less than you earn.

Paying yourself first is not just about allocating funds for your personal use from your monthly income. It requires a whole new mindset for it to be done well on a sustainable basis. When I first started out, I had a hard time understanding the concept of ‘pay yourself first.’ I thought it was simply a matter of changing the sequence of disbursing your monthly income, putting savings first before spending. I would save for a month or two, and then un-save. Something will always come up to swallow up the money I have saved, and I will be back to square one. I continued on this yo-yo mode for years until it dawned on me that it involves a paradigm shift. It involves a savings and investment focus anchored by saving first and adjusting your current lifestyle to fit what is left to spend. This means what is left becomes your new net income. This is where you cut your coat according to your cloth, not your size. To make the coat fit, you may have to lose some weight. You need to give your money some time to work hard for you so that you don’t have to work so hard for money. It was a total new mindset.