How Much Should I Be Paying Myself Before Bills?

"Pay yourself first" is an aphorism that means you should set money aside in savings before you pay your bills. Among those experts that suggest you pay yourself first, the recommend amount that you pay yourself varies widely.

  1. Percentages

    • No single amount of money to be set aside is unanimously recommended by experts. Small business organization SOHO America suggests starting small if necessary, and that even paying yourself as little as 1 percent of your monthly income or $5 a month can be a positive start. According to financial expert David Bach, you should set aside at least one hour's pay for every day, or approximately 12 1/2 percent of every check.

    Pay Within Your Ability

    • Although paying yourself first is a good strategy for saving, set reasonable goals. According to the Federal Deposit Insurance Corporation, trying to pay yourself too much can be counterproductive if it causes you to pay your bills late. If you miss your bills, you'll lose money because of late fees, repossession, reconnection fees or an interruption of services that might prevent you from working.

    Additional Income

    • The FDIC also recommends putting any additional income into savings before paying your bills. Income in excess of your usual wages might include a yearly or monthly bonus, incentive pay, overtime pay or your tax return. Because your budget functions without this money, it is not necessary for bills and represents a sum of money that can easily be transferred to savings without straining your finances.

    Needs vs. Wants

    • When deciding how much to set aside for savings each month, the FDIC also recommends taking a close look at your budget and identifying wants and needs. Try to identify common expenses that you do not really need. These could include expenses such as cigarettes, snacks, or soda, occasional expenses such as eating out or impulse shopping, and monthly expenses for services you may not need, such as a cable TV package. The FDIC suggests curbing as much unnecessary spending as possible, and saving the money each month instead.

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