Pay Yourself First

The Golden Rule of Personal Finance

Photo by Giorgio Trovato on Unsplash

The first and probably the most important rule in personal finance known as the Golden Rule is a simplistic approach to managing one’s personal cash flow.

In the world of personal finance, one principle stands out for its simplicity and effectiveness: pay yourself first. This, though so basic, has the potential of turning your finances around for the better.

Indeed, paying yourself first means that the money that you save is as important as other essential services such as electricity or water bills. While expending your income on expenses and other spending, first, you save a portion of it for your future self. This was for short-term needs such as, for emergencies, for retirement, or saving for some financial projects.

The beauty of this approach is based on its psychological effect. If you wait for some period before making the spending, you end up being forced to spend what you did not intend to spend on other unnecessary things. It also develops the culture of saving, through a compound interest process that continues after the retirement age.

Implementing this strategy is simple:

1. Come up with a practical time and amount by which you can be able to save that amount.
2. Pay yourself at least, the first thing that you…