The concept comes from The Millionaire Next Door, a very famous personal finance book. It studies 1,000 "ordinary" millionaires and how they got that way. (Hint: none of them got lucky working at the right startup.)
Pay yourself first simply means save, THEN spend. Most of us pay everyone else first. We pay the Whole Foods cashier and the contractor and the golf course attendant and the waiter and our lawn guy and pool guy and the list goes on.
For the next 6 months, try paying YOURSELF first THEN pay everyone else.
If you hate it, then in 6 months go back to normal and enjoy spending all the money you just saved.
- Multiply your monthly take-home pay by .05
- Set up an automatic, monthly transfer from your checking to savings for exactly that amount
- Don't look at your savings for 6 months.
On August 22, I'll send you a reminder to tell me how much you saved and how good you feel.