How to pay yourself first when you’re broke

Let me tell you about something I had to learn before I ever became a successful investor.

Before I ever got my financial life together.

Before I ever even made myself a budget.

It’s the principle that led me to the conclusion that I even needed a budget.

Had I not taken the time to get this right, I know for certain that I would have NEVER been able to build substantial stock portfolios for myself, my husband, and my kids.

#1 rule of building wealth from the bottom up:




Paying yourself first is arguably the most important factor to building a financial empire.

You’ve heard it. But what does this truly mean? And how can you successfully pay yourself first when you don’t have enough money to go around to begin with?

When I was first introduced to this concept of paying myself first (sadly, not until I was in my mid 20s!), I scoffed. “That’s for people who actually HAVE extra money. I don’t.”

I was fresh out of bankruptcy, my bills were (still, shamefully) consistently late, I regularly paid for gas in loose change, and overdraft fees were the rule rather than the exception for me.

But I tucked the idea away in my mind anyway.

Pay yourself first.

I was clueless about how to manage my money, as many people are. Unless your parents have excellent financial health and passed the principles along to you, you may be able to relate.

It felt like no matter how careful I felt I was with my spending, I consistently had more month than money. However, to say I was ALWAYS careful with my money would be a huge lie.

Living with an average of $3.34 in your checking account at any given moment can keep you in a constant state of stress and anxiety, especially when you have a family to support (I was a single mother at the time).

When it seems like you’ll never have enough money to go around, even when you ARE watching your spending, sometimes you get the little voice in the back of your head whispering “Treat yoself”.

“I’m going to be short on rent anyway and will have to pay the late fee regardless. Why not go enjoy a movie? What’s another $20? I deserve it.”


After chewing on the whole “pay yourself first” concept for a while, it finally hit me:

The entire thought process of “spending on myself even when I can’t afford it because I deserve it” should be applied DIRECTLY to the concept of PAYING myself first.

Not SPENDING on myself. PAYING myself.

When rationalizing my spending on non-necessities, I’d talk myself through the fact that NOT spending the $5 or $10 or $20 wasn’t going to keep me from having to pay a late/overdraft fee on my bills anyway.

Why could I talk myself into spending, but not into setting money aside for my and my son’s future?

Even though there wasn’t enough money to go around, somehow we always survived. It was a matter of priorities.

When I spent on a treat, while it temporarily made me feel good, afterwards the money was gone. If I put it away for myself, it was still mine, ready to have purpose for something else down the road. For something bigger and better for us than our current circumstances.

At the time I didn’t know my next steps or what that “bigger and better” would be…I just knew that in order to have different results, I needed a different method.

I worked to shift my mindset from “Enjoying myself even when I can’t afford it because I deserve it.” to “Putting money away for my future self even when I can’t afford it because I deserve it.”

Side note: This is NOT to say that if you’re broke, you should never spend anything to enjoy yourself. The narrative that poor people cannot have any simple treats or luxuries is ridiculous. We’re all given only one life to live.

However, once the idea this took root, I understood that even as broke as I was, I had choices. Maybe I had the power to change my future if I wanted it badly enough.

It just had to become the top priority.

To be transparent, I failed at this several times before it took.

I had a savings account at my regular bank, which made it too easy to transfer the savings back to checking to spend.

The problem was not only that the money was too accessible, but also that it seemed like something else was always more important than allowing money to sit idly:

My checking account was overdrawn (again) and they were going to close it.

Spencer outgrew his clothes or shoes.

My car was stolen (true story, right out of my driveway)

What’s the point of having money sitting around if it’s not doing anything beneficial for you? I’d think.

And so I’d spend it. And the cycle began again. And again.

I was SO tired of it.

Ultimately, I opened a new savings account at a whole new bank and declined to be issued an ATM card. I threw away the withdrawal slips. This was WAY before apps like Digit or Qapital (or even smartphones!)

I set my regular checking account up to deposit $5 per paycheck into the savings account on payday. I pretended this savings account did not exist.

This money couldn’t be used as an emergency fund; my financial situation was in a constant state of emergency. I knew it would never amount to anything if I tapped into it that way. It had to have a bigger purpose.

I started treating that $5 like a bill. I paid it automatically and in my mind, it was gone. Only instead of paying it to someone else, I was paying it to future me. It was to be used for something I didn’t quite understand yet.

I stayed the course this time, although it wasn’t easy. I still struggled with the bigger picture, and where the value was in having cash I wouldn’t allow myself to use. What was my end game?

$5 every 2 weeks doesn’t seem like a huge sacrifice at first glance. But if I was going to be able to pretend my savings wasn’t there on the days I wasn’t sure if I could get to work on gas fumes, the money needed to have a more important function than just sitting there.

I realized the money I was paying myself had the potential to grow and build for me even when I wasn’t looking. My little money I was setting aside could keep paying me all on it’s own.

That “something” that I didn’t understand, that very important function my savings needed for it to be more valuable for me to leave the money alone than spend it, would ultimately be my first shares of stock.

While my money sat idly in a savings account, it was more valuable to me to use it for whatever it was that felt important at the time.

When my money was invested and growing and I understood it’s potential for the long term, it became impossible for me to consider interrupting it when it was so hard at work making more money for me. It was helping create a future net worth for us that I couldn’t create all by myself.

Paying myself first ultimately became an essential and non-negotiable habit for me, before I ever started investing, before I even made a budget.

Paying myself became the most important part of my budget.

That $5 payment eventually was rerouted to my Roth IRA for investment. It wasn’t until I saw my money working and growing in my stock investments that I cut my spending everywhere I could, created a solid budget, and consistently increased the automatic contributions.

I couldn’t have ever built my stock portfolios without strictly enforcing this principle for myself. I still pay myself first. It will be a habit for life, and for my children too.

Paying yourself first is about creating a healthy financial habit.

There are more elements to successfully building a positive net worth. For me, this was just the first step that helped me make the other elements a priority.

If your bills exceed your income, you have to reduce your bills and/or elevate your income. You’ll never stay out of the hole if you don’t.

Once your spending is in check and is lower than your income, pay your bills on time. When you don’t have to pay late or overdraft fees, you can pay that money to yourself, and make it grow!

If you have high interest debt, usually from credit cards, pay it off. The interest is higher than what you’ll likely earn in stock gains.

As you pay off debt and control your budget, increase your payments to yourself. When you get a raise or bonus, instead of increasing your spending, be sure to pay yourself your cut.

Learn how to maximize these payments you make to yourself. After you have some money set aside for emergencies, your money shouldn’t be sitting around. It should be working, building, and growing on your behalf.

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