Start paying bills to yourself

Last updated on 29th July, 2021 at 09:31 am

We all know we should save for our future, whether it’s for retirement, our kids’ education or a rainy day. But why is it so hard to stay committed to good savings? Get in the habit of treating your future self the way you do bills by putting money aside for yourself regularly.

We live in a consumerist world where it’s easy to get swept up by constant urges to have what others have – always being on the hunt for the next big thing,” says Andre Wentzel, Head: Client Solutions Savings at Sanlam. “We spend money on these ‘wants’ first, and savings last, because spending is instant, visible and tangible. But the only way to make savings work for you is to pay yourself first, not last, otherwise you’ll never have any money left over for future goals and opportunities.”

Self-care vs self-sabotage

“Your future is just as important as the bills you have to pay now. ‘Future you’ also deserves to be looked after. Think of saving money as a method of self-care. You are affording yourself opportunities in the future, whether it’s to start a business or to live comfortably when you can no longer earn a salary. If you don’t save, you’re actually limiting yourself. Don’t sabotage your own future,” says Wentzel.

Read more about how budgeting is a form of self-care here.

What is ‘pay yourself first’?

Paying yourself first is one of the oldest rules of personal finance. As soon as your salary hits your bank account and you start paying bills, you should set money aside for savings or paying debt. How you pay yourself depends on you – it can be a percentage of your salary or a small amount. Wentzel warns about a ‘giving mentality’. “Giving to others instead of ourselves gives us an immediate emotional benefit of feeling appreciated. But if we channel this generosity into our own savings, we can provide for others for years to come.”

Three steps to ‘paying yourself first’

1. Invest in ‘future you’
‘Future you’ deserves to be paid as much as the school fees, the phone bill and the security company. By paying yourself first, you’re mentally establishing saving as a priority. Setting aside money each month to grow your harvest of the future, so to speak, is empowering. It will help you maintain and improve your lifestyle over time.

How to do it
Relook your budget so you know exactly what’s coming in and going out, and so that you can list yourself as a bill with your other expenses. “Automate this payment as much as possible, whether it’s a contribution to retirement savings going off before you get your salary, or a monthly direct debit,” suggests Wentzel. “If you pay yourself manually, it’s normal to have feelings of pain and loss. But if you never see that money, you’ll surprise yourself with what small, regular amounts can become over time.”

2. Empower yourself with information
Knowledge is power, and if you’re going to pay yourself first, find a method that works for you. Just as you would put research into the right exercise or health regime for your lifestyle, find a method of paying yourself first that is doable and sustainable.

How to do it
“Focus on spending less each month and banking the difference. You could also start a side hustle and put all of your profits towards your savings, separating your salary from your extra income,” says Wentzel. Read this to find out how to start a side hustle and make it a success.

3. Make your savings goals extra-visible
“As behavioural economist Dan Ariely points out, when we invented money, we made spending very visible, but we made saving completely invisible. That’s something we need to change, and having very clear savings goals will help,” continues Wentzel. “Research has proven that people who invest money with very specific goals save a lot more over the long term. It’s about retraining your mind to focus less on the now and more on the future.”

How to do it
Be very clear with yourself about what your savings goals are. It’s good to have short-term and long-term goals. Give each goal a name and an end date, and identify what each goal means to you personally. Make these as visible and specific as possible.

If you want to live in a different country one day, put up photos around your house as motivation. Use an app to see how your savings are growing or create a colourful progress chart.

Three ways to spend less

1. “The world is making it easier to get around without cash, but we should make our money more visible – not less,” says Wentzel. “We should put limits in place to help ourselves think before we spend. Try the ‘envelope method’ for a week: only spend cash you’ve budgeted for that week. You’re bound to spend less.”
2. “Try to curb emotional spending, for example, buying a new piece of tech because you feel bored or sad. Replace that with something else, like calling a friend.”
3. “Try to stick to one big shopping trip a month and only one top-up trip per week. The less time you spend at the shops, the better for your bank account.”

It’s important to be very honest with yourself about the difference between self-care and self-sabotage. Take care of ‘future you’ by setting clear financial goals. Use this savings calculator to work out how much you should put away regularly to reach your financial goals.