If the concept of "Pay Yourself First" is foreign to you, don't worry, the concept was also greek to me during my YUPpy (young urban professional) days. Working as an associate in a Makati law firm, I had the means to spend, nay, splurge. I had my own condo unit, go out whenever I want and splurge on anything I fancy. I spend so long as there's cash in my wallet, or, more appropriately, ATM. Whatever money is left, I told myself, will be my savings. This strategy appeared to be sound. I realized later on that I had no savings, primarily because by the end of the salary/pay cycle, I had spent all I had and nothing is left for savings.

 

Then I met my former girlfriend ("former" because she's now my wife). She taught me not only to, ahem, love unconditionally, but also the concept of paying myself first. Here's how it's normally done:

1. Determine how much you earn in a month. Include income from any sidelines, aside from your day job, in the computation. Just to be safe, do not factor in your 13th month pay and bonuses.

2. Make a list of all your expected expenses for the month. This includes rent, food and other fixed expenses. Don't forget to factor in expenses that are not limited to a particular month, like car maintenance, registration and insurance, as well as personal insurance.

3. Set a cap for gimmicks and other "non-essential" expenses. Expenses for relaxation and having fun are, of course, necessary, as all work and no play makes you a dull, if not a dead, man. Still, these expenses are not as indispensible like your rent or food expenses.

4. Stash the balance somewhere safe. After you've determined the amount that you could save, immediately take it out of circulation. Stash it somewhere safe, not so much from others, but from yourself. This way, you limit yourself to your budget and remove the temptation of spending more because there's still money in your wallet or ATM.

Based on the simplistic - but sound - characterization that everything that goes out of your wallent is an expense, the amount that goes out to personal savings could also be considered as an expense.  However, by paying yourself first ahead of others, you guarantee that something is left for the rainy days. We all know that no matter how rich or fortunate we think we are, the rainy days always come along. So, pay yourself first.

The concept is great, but the implementation is often dificult. It's always tempting to spend more. In my case, the implementation of the "pay yourself first" concept was extremely simple - I gave my significant other a portion of my salary as soon as I withdrew it from the ATM. This sounds stupid, I know, as no sane man would normally give his salary to his girlfriend. But it worked for me. She took charge in paying myself first. Today, she pays ourselves first.