What does 'pay yourself first' mean in personal finance?

The concept of "pay yourself first" in personal finance emphasizes the importance of prioritizing savings and investments before addressing other expenses. This principle encourages individuals to set aside a portion of their income for savings or investment immediately when they receive their paycheck, rather than waiting until all other expenses have been accounted for. This approach is intended to foster a disciplined savings habit, ensuring that individuals build their financial security and achieve their long-term goals, such as retirement or purchasing a home.

By focusing on saving first, individuals are less likely to spend their income frivolously, as they recognize that their savings are a non-negotiable part of their financial plan. This proactive approach to saving helps mitigate the risk of living paycheck to paycheck, allowing for the creation of an emergency fund and investment opportunities that can grow wealth over time. Prioritizing savings ensures that individuals are investing in their future self, leading to better financial outcomes in the long run.