Pay yourself first is an investment an personal finance concept that was put across by George S. Clason in his best-selling book, The Richest Man In Babylon.

The concept has become the cornerstone when it comes to saving and investment planning all over the world. Many financial advisors encourage people to use it and it works.

What it means

Paying yourself first means putting away money for your personal finance growth before you pay any bills or make purchases.

It means making you the high-priority bill. You have to pay yourself before you pay anybody else.

Paying yourself first means saving and investing a certain percentage of your income every month before you start spending it.

Do people do that?

Many people rarely use this concept. They pay everyone else first and they last.

Many people get income at the end of every month and they start paying their bills and buying different consumer products. After paying all their bills and buying these commodities, they then save what is left.

The problem is that after these spending, nothing is usually left for many people to save and invest.

People will always have wants. If saving and investing is not a priority, you will end up buying even what you do not need. You will buy products based on a mere desire. In this way, you will spend even what you were meant to invest in for the future.

To many people, paying themselves first does not make sense. This is because they reason too much. How can they save before paying the landlord? How can they save before taking away their monthly expenses? It does not make sense to an average mind.

Successful people succeed by putting themselves first. Their financial growth is important than the good feeling of clearing their bills on time. They would rather and invest and suffer than be happy in the short run and stagnate in the same financial position.

Robert Kiyosaki, in his book Rich Dad Poor Dad, elaborates on the concept. He explains how he always pays himself first and bills last. Here is an excerpt from the book

Now I can hear the howls from those of you who sincerely believe in paying your bills first. And I can hear all the “responsible” people who pay their bills on time. I am not saying be irresponsible and not pay your bills. All I am saying is do what the book says, which is “pay yourself first.” And the diagram above is the correct accounting picture of that action. Not the one that follows.

My wife and I have had many bookkeepers and accountants and bankers who have had a major problem with this way of looking at “pay yourself first.” The reason is that these financial professionals actually do what the masses do, which is to pay themselves last. They pay everyone else first.

There have been months in my life, when for whatever reason, cash flow was far less than my bills. I still paid myself first. My accountant and bookkeeper screamed in panic. “They're going to come after you. The IRS is going to put you in jail.” “You're going to ruin your credit rating.”

“They'll cut off the electricity.” I still paid myself first.

“Why?” you ask. Because that's what the story The Richest Man In Babylon was all about. The power of self-discipline and the power of internal fortitude. “Guts,” in less elegant terms. As my rich dad taught me the first month I worked for him, most people allow the world to push them around. A bill collector calls and you “pay or else.” So you pay and not pay yourself. A sales clerk says, “Oh, just put it on your charge card.” Your real estate agent tells you to “go ahead the government allows you a tax deduction on your home.” That is what the book is really about. Having the guts to go against the tide and get rich. You may not be weak, but when it comes to money, many people get wimpy.

This is how many people reason. They cannot understand how the concept can be applied in our day to day lives.

There are several ways of making sure that you pay yourself first: