What does “Pay Yourself First” Even Mean?

Posted on Posted in Investing

Do ever hear this thing about paying yourself first? You hear it from successful people. Business owners. Higher income individuals. How is that possible? You work. You get paid. You pay your rent and bills and get to save or spend what's left over, right? The statement in itself is confusing.

To take it apart, I have to go back to the first time I heard it. In college, I didn't do a lot of reading but I did hear of this one supposedly life changing book, Rich Dad, Poor Dad by Robert Kiyasaki. I recognized it from when my dad had it on our bookshelf as a kid. I finished the book and without giving it away, Robert talks about his upbringing and how he built his knowledge of financially literacy through a mentor he calls "Rich Dad". He says his rich dad always taught him to pay himself first, before anyone else and that this is what wealthy people do. They pay themselves and then everyone else gets what's left over.

He goes into a little more detail, but it still made no sense to me at the time. The overall book doesn't have much tangible information on investing but it definitely inspires you to want to build wealth like Robert did. It's more about building a foundation and learning as much as you can in order to make smart decisions. Good lessons. It's made the guy millions and he’s built his brand off of it.

Long after I read the book, I was still hung up on that whole "paying yourself first" thing. My landlord collects the rent check on the first of the month. No one is getting paid before her. I doubt I could say to her, "Hey, I’ve been told to pay myself first so I'll give you the check toward the end of the month". That’s not going to fly. This theme of paying yourself kept coming up in articles and blog posts I read. I pieced together that paying yourself and investing in yourself are one in the same. Before you're like “DUH dummy, this guy just lost all credibility", hear my out.

When you decide to pay yourself first, you set aside money that you will invest in your personal growth. If you're contributing to your retirement, this is the most basic version of paying yourself. It can also be putting money toward books, school, real estate, courses to develop skills, conferences in your industry, or anything else that's going to give you the edge to help you grow financially. Obviously, not paying your rent or mortgage will get you evicted. However, these are fixed costs that you know must be paid on a regular basis. Investing in yourself does not mean having to wait until after you pay others. It just means getting your priorities and goals straight.

For instance, think of your landlord that collects the rent check on the first of the month. She’s probably blasting Bone Thugs - 1st of tha Month as she rolls up to your crib. She took the time to invest in herself when she purchased the property you call home. The property probably had a decent down payment and she probably had to rearrange some of her priorities to save the money to buy it. She could've been taking vacations, buying luxury cars, getting bottle service at Vegas nightclubs, but no, she used her dollars on something that was going to give her a return on investment. Now that she’s getting consistent paychecks from renters, she could be splurging the money collected from you on said lifestyle. Who knows? She also could be reinvesting in other properties to maximize her wealth.

Knowing your goals and what you want to do can sometimes be hard to figure out. The majority of people have to worry about car payments, insurance, student loans, food, clothing, school, rent, the list goes on and on. There’s a never-ending list of expenses that consume your income. It’s important to know your necessities and decide what you can live without. Do you need a BMW? If you can afford it, work hard for it, and don’t need the money for something else, then you deserve it. But if you’re dreading making those monthly payments and can’t stand the service costs when something goes wrong, then it’s likely in your best interest to downgrade. Volkswagens are German, too! Guess that’s a bad example.

How about when you want to take your life in a completely different direction? You may have started working for a company you thought was a perfect fit, but the honeymoon phase passed and you're looking for new opportunities. It happens. Setting yourself up for success no matter the changing circumstances can give you piece of mind. Paying yourself first allows you to better absorb these life changes. Looking at the glass as half empty when using whatever money you have left over is only going to make you feel trapped.

Changing your mindset and realizing that you have to be selfish when it comes to what you want to pursue will open a world of opportunity. Continually invest in numero uno. Yourself.

3 thoughts on “What does “Pay Yourself First” Even Mean?

Leave a Reply

Your email address will not be published. Required fields are marked *