I Pay Myself First – And Last – And All Along The Way

Here’s how I manage to fully-fund my 403(b) retirement account, my Roth IRA, save for my kids’ college, and maintain a healthy emergency fund.

I pay myself first –

Before I receive my monthly paycheck, a portion is withheld, equal to 1/12 of my annual 403(b) contribution.

As soon as I receive my paycheck, I deposit it in my checking account. I then schedule several transfers. First, I transfer a fixed amount to my non-retirement savings account. Second, I transfer an amount to either my Roth IRA or my wife’s Roth IRA, depending on which account I’m working to fund in a particular span of months. Currently, I am working to fully-fund my wife’s Roth IRA.

I pay myself last –

At the end of each month, I take any amount remaining in my checking account (above a $100 cushion) and transfer it to my savings account. From my saving account, I transfer funds to either my daughter’s Education Savings Account or my son’s Education Savings Account, depending on which account I’m working to fund in a particular span of months. Currently, I’m working to fully-fund my daughter’s ESA.

I pay myself along the way –

When I sit down to create my monthly budget, I use only the income from my regular job. Any other income that I might receive, whether it be from blogging or writing or selling things on eBay, is deposited into my business checking account. The vast majority is then transferred to my non-retirement savings. A small amount remains in my business checking and is used to cover the cost of doing business.

At the end of the fiscal year, I make a contribution, from my non-retirement savings, to my SEP-IRA (a type of retirement account for people who have self employment income). The amount of this contribution will vary, depending on how much additional income I generate from blogging and writing.

5 thoughts on “I Pay Myself First – And Last – And All Along The Way

  1. I like the philosophy of “Paying yourself”. It makes it easier to save when you think of running your life as a “business”, where one of the “bills” you are responsible for is, well, your own savings.

  2. I like this discplined appraoch and espically the fact that you manage your budget on your primary income with the rest going off towards to the various saving and investment accounts. I follow a similar strategy.

  3. Great blog.
    One can never hear the mantras of financial freedom often enough. Too many people in North America not only do not save but actually survive on Credit! We are all accountable for our own success and a community of like-minded people certainly helps support our own convictions.

    I have had a diverse approach to investing for many years and have recently started a blog/forum with a focus on ‘Philosophy and Science of Wealth’. Anyone and everyone is encouraged to comment or even submit their own post.


  4. As previously mentioned… how disciplined of you. I can see the point in doing this, however I have a hard time contributing to my sons college fund that makes 5 percent when we are paying on loans at 10 percent. Hopefully some day I can have the loans paid off and be as good at saving as I once was spending. Great ideas.

  5. I have found from experience that to tithe is where my first money goes and God has always made the rest go further.

Comments are closed.