The #1 Strategy and Simple Habit to Build Wealth and Achieve Financial Freedom

In recent conversations with millennial professionals, I’ve realized that some people may not be familiar with the concept of paying yourself first.

Today, I want to share with you a simple strategy to Paying Yourself First.

The pay yourself first concept is literally an epitome of its own words – you pay yourself first.

Financial literacy is essential for building the future you want. It’s never too late to start. In other words, we are neither too young nor too old to start.

Wherever you are at in life is the perfect time to start — if you haven’t yet started creating a solid financial future.

Paying yourself first is the foundation of building wealth and creating a solid financial future.

It empowers you to start a life-long journey of growth, learning, and discovery at every stage of life.

This approach helps guide you through life’s transitions more easily and smoothly while building your confidence as you progress.

Not only does it help empower us to build wealth, it is the beginning of walking towards the path of life fulfilment and life purpose. It sets us up for our future – for a better future!

It’s not about saving money. Paying yourself first is about creating a buffer or a cushion, if you will, to help you through any transition at any stage in your life.

If you need extra funds, they are there for you. You are putting away funds to build a better future.

So, what exactly is Paying Yourself First, and how do you begin?

Immediately after you get paid, set aside a percentage of your income. First, decide what percentage you want to put aside —ideally between 5% and 20%. Many financial experts recommend saving 10% or even 15%.

However, if you have never set aside money before, you might think it would be challenging to start — especially if you have debts to pay off or you have lots of bills to pay.

If you currently feel like you’re living paycheck to paycheck, now is the time to start thinking about building for the future.

As you pay off your debt, you’ll begin to build savings on the side. By the time your debt is fully paid off, you’ll have a positive balance, rather than one that is at zero or in the negative.

Actually, I learned this concept from a friend, Agnes, who helped me understand the importance of having a positive balance when we were both in our 20s, and I was struggling to pay off college fees and credit card bills then.

A big shoutout to Agnes, my great friend, for teaching me this valuable lesson!

Now, if the concept of paying yourself first feels too intimidating or uncomfortable to start, begin with 5%.

I suggest setting aside 5% of your gross pay from each paycheck. For example, if you get paid bi-weekly, this would mean putting away 5% of your gross pay every two weeks.

When you break down the percentage you’re putting away each month, you’ll realize it could be as little as a few dollars a day.

What small daily expenses could you cut back on? Perhaps it’s a chocolate bar, a coffee from your local coffee shop, or even a cigarette if you’re a smoker.

By reducing just one of these daily habits—like eating one less chocolate bar, drinking one less coffee, or smoking one less cigarette—you’ll save a few dollars each week.

That small amount can add up and be redirected towards building your future.

Here are 4 simple steps to “Paying Yourself First”:

1) Open a savings account, preferably one with a higher interest rate; and if you can name it, call it “Pay Myself First Account.”

2) List on an Excel spreadsheet or on a plain piece of paper all the payments you need to make each month, including rent and utilities, starting with the most important payment first.

3) Every time you get paid, you will first pay yourself, deducting the percentage from your gross pay. Gross pay is before any deductions. If you have chosen 5% then you will transfer 5% of your gross pay to your “Pay Myself First” Savings Account.

4) Allow your money to grow.

My advice is, don’t keep looking at the balance of your new account for at least 3-6 months.

In the beginning, when the balance is still low, you may be discouraged from keeping it there.

Thoughts like “this is not worth it” may enter your mind. This is all normal because you may still feel uncomfortable putting this money away.

What you have been used to is spending and not putting aside money. You will feel like this until you are used to putting aside that 5% of your gross pay every two weeks.

When you are completely comfortable, which can take up to 6 months, you can look at the Savings Account.

When you do look at the account 6 months later, you might feel a sense of achievement and may even be inspired to increase your percentage and want to spend less money on things you don’t need.

It is a very cool phenomenon once you are at that stage.

After setting aside your chosen percentage to your savings account, start making the next most important payments.

This might include rent, loan payments, utilities, credit card bills, phone bills, cable bills, and groceries. Here, I am referring to Step #2 that I mentioned earlier.

Listing these payments helps you see, organize, forecast, and track your monthly spending.

In six months, you can assess whether to increase your savings percentage from 5% to 7%, 10%, or even higher.

As you get accustomed to setting aside money, you may gradually work up to paying yourself 20% —whether by spending less, moving to a higher-paying job, or both.

The key is to be consistent and be realistic. Putting aside a percentage of your own money needs to be an action that inspires you.

When you feel inspired to take on this positive step, it’s easier to make it a lasting positive habit. Soon, putting aside money will feel comfortable, even rewarding.

Along the way, you will gain budgeting, financial planning, and goal-setting skills.

Plus, you will experience a sense of achievement and success as you continue to build toward financial freedom and security.

Tip: You may choose to see a financial planner or a banking advisor who may help you do automatic transfers to help you put aside money bi-weekly.

However, making the transfer yourself can be a great lesson for taking control of your own money, and gaining a sense of responsibility of your own wealth.

Either way, bi-weekly manual or automatic transfer is an empowerment to building wealth that helps you gain financial freedom.

While you start putting aside money, you may want some support.

Some of the support that guided me through building this positive habit came from reading books like, The Psychology of Money by Morgan Housel and Money: Master The Game by Tony Robbins.

Start today – invest in yourself for a better future; Invest in the future you!