Pay Yourself First - The 10% Rule

The "Pay Yourself 10% First" rule is a personal finance principle that suggests setting aside 10% of your income for savings or investments before allocating the rest of your income for expenses and other financial obligations. The idea behind this rule is to prioritize saving and building wealth as a regular habit.

Here's how the "Pay Yourself 10% First" rule typically works:

1. Calculate your income: Determine the amount of money you earn, such as your salary or any other regular sources of income.

2. Deduct 10%: Take 10% of your income and set it aside for savings or investments. This can be done by transferring the funds to a separate savings account or investment vehicle.

3. Budget with the remaining 90%: Use the remaining 90% of your income to cover your living expenses, bills, debts, and other financial obligations.

4. Adjust your lifestyle if necessary: If your expenses exceed the remaining 90%, you may need to reevaluate your spending habits and make adjustments to ensure you live within your means.

5. Prioritize savings and investments: Treat the 10% you set aside as a non-negotiable expense. Aim to consistently save or invest this amount each time you receive income.

The "Pay Yourself 10% First" rule encourages individuals to prioritize their long-term financial goals by making saving a priority. It helps build a habit of saving and allows individuals to accumulate wealth over time. The saved funds can be used for emergencies, future expenses, retirement planning, or achieving other financial objectives.

It's worth noting that the "Pay Yourself 10% First" rule is a general guideline, and the actual percentage may vary based on personal circumstances and financial goals. Some individuals may choose to save a higher percentage, especially if they have specific financial goals or are in a position to do so. The key is to establish a consistent saving habit and adjust the percentage based on your financial situation.

Of course, if you're investing in a 401(k), HSA, or other investment vehicles, those count toward the 10%, how

ever, the more you save, the faster you will achieve your goals.