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Pay Yourself First means Invest or save first before making any expense. It is similar to save first and then spend. This means saving and investment should on your top priority list.
I know it is difficult to follow this rule due to psychological limitation. We are programmed to handle money as spender. We can easily plan to spend money. However, it is difficult for us to save money.
The similar concept can be explained by an analogy of doing exercise. Many experts recommend “Doing Exercise First in the morning”. Regular exercise in the morning helps you to stay healthy. However, due to psychological reasons, many people say that they don’t have time to exercise in the morning. Later in the day they may or may not do exercise.
Pay Yourself First is a similar concept. If you pay money to everyone else you may or may not save money for yourself. However, if you follow this concept very well you can be rich for sure.

How to Become Rich by Pay Yourself First?

Follow the step given below to become rich via – “Pay Yourself First”.

  • First thing is to find out your monthly outgo on mandatory expenses. Once you have this detail find out how much money you can save from your income? It is advisable to save and invest at least 10% of your monthly income to start with.
  • Once you decide the amount you need to automate your investment in the assets that provide sufficient growth or generate passive income. It could be mutual funds, stocks, PPF, real estate, IUL etc. Payment should go to investment as soon as you receive your paycheck.
  • By using this method you can establish a flow of steady passive income over the period. It could be either dividend, interest income or maybe rent. This passive income should reach a level where you can manage all your expenses from passive income. This is called as Financial Independence stage.
  • Once you reach this stage. You can invest your entire salary/income to buy an asset that generates additional passive income.


Saving money is a habit and so is spending. While most of us are already “masters” in spending, we need to understand that saving bears equal weight with spending and our saving habits can determine whether we are ready to accumulate wealth. When one receives income from a job or salary, a lot of people are using the wrong savings formula. How about you, what is your savings formula?

Here are 3 savings equations and see which one is yours.

(1.) Income – Expenses = Savings

After receiving income, majority of your funds are then budgeted and spent on your expenses including but not limited to daily expenses, food, clothing, transportation, bills: water, electricity, phone bills, mobile loads, schooling, vitamins and/or medicines, lifestyle, travel, gadgets, and the list may go on and on. And after all that, whatever is left is for savings.

Question: does this formula work? Most the time, there is nothing left to save!

(2.) Expenses – Income = Savings

This formula is what I believe the worst formula in saving money. Before receiving income, you already spent money through credit cards or loans. This is a very dangerous formula because there may come a time that after paying all debts, nothing is left not just for saving money but also for your daily expenses and may require you to go into more debts.

(3.) Income – Savings = Expenses

This is the better formula. Again, saving is a habit. Unless we automatically set aside money for saving, our spending habits will always prevail. Saving is a decision, and regardless how much amount you set aside, the act or “discipline” of saving money will create the habit that will eventually lead us ready in creating wealth.