Why I always pay myself first

When I was a small child, I was once given a £50 note for Christmas by my paternal Grandfather and it was more money than I’d ever seen in one place. He wasn’t (and still isn’t) a wealthy man, but he’d saved up for a few months so that all his Grandchildren could each have a single £50 note for Christmas. My friends at the time all asked me what I was going to spend it on; video games, trips to the cinema, a new hoodie, but truthfully, I couldn’t bring myself to waste what he’d worked so hard to give me.

When my Father died, many years later, I was clearing out my room when I found that same £50 note in my safe, carefully folded and tucked away. I’d held onto it all those years as a symbol of what hard work could provide me – that lesson was far more valuable and long lasting than any trinket I could have bought.

Ironically, despite having always held that lesson dear, I’m not naturally disciplined when it comes to financial matters. I’d rather spend my money, enjoy life and keep telling myself ‘I’ll save money next month’. When I was younger, my savings rate was paltry – I saved maybe 1p of every pound I earned, and even that was pretty erratic. When I was earning pocket money, this didn’t bother me so much. I’d save money short-term for expensive items, and then spend it when I had enough. Long=term saving just seemed like a waste of time.

A changing world

When my Father died, that all changed overnight. The world had taken my protection away – slowly and painfully. I’d known for a matter of weeks that I was going to lose him, but when it happened, it totally transformed the way I looked at the world. So many people my age would just casually ask their parents for money to go to the cinema or to buy clothes or go for a meal. So many were relying on their parents to help out with things like cars and holidays. I didn’t have that option anymore.

One of my childhood friends and I used to fantasise about having expensive cars and houses and suits. About living glamorous lifestyles far removed from the world we were actually in. If I was ever going to get any of it, I was going to have to buckle down and get disciplined with what I was doing. No more letting money trickle through my fingers.

I immediately decided that I had to set up a foolproof system to overcome my natural lack of discipline. I wasn’t going to build any wealth immediately, and I was never going to do it as long as I was only saving 1% (or less) of my income!

The first thing I did was to set up a regular saver with my bank. I didn’t put much in each month – maybe £50, but it was something. I couldn’t access the money for 12 months, at which point I’d get the whole sum back, along with the interest due. When my £624 came back to me a year later, I immediately put it in an ISA, and then set up another regular saver, this time for £75 a month. By increasing the rate at which I was saving, I hoped to work my way up to saving hundreds of pounds every month – a sum undreamt of at that age.

What about old age?

When I was younger, I never really thought what it would be like when I was old. Certainly, I wanted to be older, but my imagination only extended to my twenties or thirties. When I got there though, I realised trading my time for money was one day going to end. One day, I was going to be too old, or too ill to carry on working, and when I was, 99% of my income was going to disappear (certainly, the few thousand pounds I’d managed to save weren’t going to last me long!)

I therefore set up a pension with my company and paid in the maximum amount I felt I could afford. In addition to the regular saver, I was now saving nearly £200 a month and receiving interest each year which outweighed the largest sums of pocket money I’d received only years earlier.

Still, it didn’t seem enough to me, and so I set up payments to various savings vehicles, including a ‘rainy-day’ fund, which I swore would only be touched in the direst of emergencies. I began scouring my bank statements for frivolous spending, trimming a pint here and there, shopping in sales, refusing to incur interest on my credit cards by paying them off and using zero-interest rates to pay them off gradually.

Eventually, I also started looking at ways to invest my growing pile of cash. The financial crisis pushed interest rates down and down, from the heady heights of five and six percent to less than 1% at many banks. I started investing in P2P lending and dividend paying shares, driving my return back up to about 5% a year.


It’s now been nearly nine years since my Father died, more than that since he collapsed in the car park all those years ago. The salary I’m paid has nearly doubled since I first started work, and just like the childhood dream, I can afford a nice flat and nice suits. My expenses have increased dramatically too; but I as I always pay myself first, I don’t really mind.

I now save around 18p of every pound I earn, an 18x improvement in just nine years. I’m hoping to increase that rate further over the next nine years – to chase a savings rate of 30%. It’s going to take some careful financial management; the urge to spend is ever present, but by removing money from my paycheque before I ever see it, I find that I give myself a better chance.