Most people save money like this: they pay their bills, buy what they need (and want), and then save whatever is left over at the end of the month. The problem? There is rarely anything left over.

"Pay yourself first" flips this approach on its head. Instead of saving what is left, you save first — before you pay anyone else, before you buy anything. It sounds simple, but this tiny mindset shift has helped millions of people build wealth they never thought possible.

What Does "Pay Yourself First" Actually Mean?

Paying yourself first means treating your savings like a non-negotiable bill. Just like you would never skip your rent or mortgage payment, you never skip your savings contribution.

The moment your paycheck hits your account, a predetermined amount is automatically moved to savings — before you have a chance to spend it on anything else.

Traditional Approach vs Pay Yourself First

Traditional (Problematic)

1. Get paid
2. Pay bills
3. Buy stuff
4. Save whatever is left
Result: Usually nothing left

Pay Yourself First

1. Get paid
2. Automatically save first
3. Pay bills
4. Spend what is left
Result: Guaranteed savings

The Psychology Behind Why It Works

The pay yourself first method works because it removes willpower from the equation. Here is why this matters:

1. Loss Aversion

Humans hate losing things more than we enjoy gaining them. When savings happens automatically at the start, you never "have" that money to spend — so you do not feel like you are losing anything. But trying to save at the end of the month feels like taking money away from yourself.

2. Lifestyle Inflation Prevention

When you pay yourself first, your "spending money" is automatically limited to what is left. This naturally prevents lifestyle inflation — the tendency to spend more as you earn more.

3. Decision Fatigue Elimination

Every financial decision you make depletes your mental energy. By automating savings, you remove a daily (or weekly) decision from your life. You do not have to think about whether to save — it just happens.

4. The "Out of Sight, Out of Mind" Effect

Money that moves to savings before you see it in your spending account does not feel like "your money." You adapt your spending to match what is available, without feeling deprived.

Did You Know?

Studies show that people who automate their savings save 2-3 times more than those who manually transfer money. The difference is not willpower — it is systems.

How Much Should You Pay Yourself?

The right amount depends on your situation, but here are some guidelines:

10%

Minimum Starting Point

If you are just starting out or have tight finances, aim for at least 10% of your take-home pay.

20%

Recommended Target

The 50/30/20 rule suggests 20% for savings and debt repayment. This is a solid goal for most Kiwis.

30%+

Aggressive Wealth Building

If you want to achieve financial independence faster, aim for 30% or more. This is where real wealth acceleration happens.

Automating "Pay Yourself First" with PayDay

The pay yourself first method only works if it is automatic. If you have to manually transfer money every payday, you will eventually forget, skip it, or talk yourself out of it.

PayDay makes this effortless. Here is how to set it up:

Setting Up Pay Yourself First in PayDay

Connect your accounts

Link your main transaction account (where your pay lands) and your savings account(s).

Create a savings split rule

Set a percentage (e.g., 20%) or fixed amount (e.g., $300) to automatically move to savings.

Set priority to "First"

Make savings your highest priority split. This ensures savings happens before any other transfers.

Let PayDay do the rest

Every time your pay lands, PayDay instantly moves your savings — before you can even think about spending it.

Advanced Tips: Supercharge Your Savings

Use multiple savings buckets

Instead of one savings account, set up separate accounts for different goals: emergency fund, house deposit, holiday fund. PayDay can split to all of them automatically.

Increase by 1% every raise

Every time you get a pay rise, increase your savings percentage by at least 1%. You will not miss what you never had.

Make it invisible

Use a savings account at a different bank, or at least one that is not visible in your everyday banking app. Out of sight, out of mind.

Save windfalls automatically

Tax refunds, bonuses, and unexpected money should follow the same rule. Set up PayDay to detect these and save a larger percentage (e.g., 50%).

The Bottom Line

Paying yourself first is not just a savings strategy — it is a fundamental shift in how you think about money. Instead of saving what is left over (which is usually nothing), you prioritise your future self before anything else.

The key is automation. When savings happens automatically, before you even see the money, building wealth becomes effortless. You do not need more willpower — you just need a better system.

With PayDay, you can set up pay yourself first in under 5 minutes. Your future self will thank you.

Pay Yourself First — The #1 Savings Strategy That Actually Works