Why you should always pay yourself first: the key to financial freedom

When it comes to personal finance, one of the most powerful yet often overlooked strategies is to pay yourself first. This simple but transformative concept means setting aside a portion of your income for savings or investments before you spend money on anything else!

Many people in Ghana immediately start allocating their income to expenses, hoping there’s something left to save in the end. Often, there isn’t. This is what is known as the “save what’s left over” method, and in my experience engaging many people as an investment advisor, this method rarely works. Paying yourself first flips this mindset. It treats saving and investing, as an essential part of your financial behaviour.

While it might feel counterintuitive, especially when the reality of many people I have engaged juggle expenses or live from one salary to another, having a mindset shift to paying yourself first is crucial, since it is the foundation of long-term financial security and independence.  By prioritizing yourself, you’re making a psychological commitment to your future. It sends a clear message: your financial goals and well-being are just as important if not more than, your day-to-day expenses. Over time, this builds discipline and reshapes your habits to align with wealth-building instead of only survival.

Why Should You Pay Yourself First?

Paying yourself first is the most reliable path to building wealth, one income at a time. By prioritizing regular contributions to your savings or investment accounts before spending on anything else, you create a habit that consistently strengthens your financial security. Over time, these contributions accumulate significantly, thanks to the power of compound interest, where your earnings begin to generate their own earnings. The earlier you start and the more consistent you remain; the more powerful compounding becomes. For instance, GHS50 contributed monthly in a mutual fund that compounds yearly at an interest rate of 15% over 30 years can generate a future value of approximately GHS282,040. This demonstrates that even modest, regular contributions can grow into substantial wealth when invested wisely over time.

Beyond building wealth, paying yourself first helps you create a financial cushion with a sense of control over your life. Life is unpredictable, and emergencies happen. Whether it’s your car breaking down, unexpected medical bills arriving, or large-scale events like the 2018/19 financial sector clean-up that altered the financial situation for many corporate workers in Ghana, or the COVID-19 pandemic that disrupted daily life and jobs worldwide, challenges can arise at any time. If you’ve paid yourself first and built up an emergency fund, these events become inconveniences rather than catastrophes. You’ll be able to handle life’s curveballs with confidence and calm. More importantly, having your own money set aside gives you options. You’re not tied to a toxic job or a difficult living situation simply because you can’t afford to make a change. Paying yourself first, therefore, gives you the power to walk away, when necessary, it gives you freedom.

Another vital benefit of this principle is that it prevents you from living salary to salary. A common misconception about paying yourself first is that only people with high incomes can afford to do it. However, this principle is less about the amount and more about the habit. Even if you can only set aside GHS 20 per income received, the act of doing so builds a critical behaviour that allows you to increase the amount you save as your income grows. On the other hand, a higher income won’t magically solve your money problems if you don’t adopt this practice early on. In fact, as an investment advisor, I have met many high earners relative to the average in Ghana who still live from paycheque to pay cheque because their lifestyle inflates alongside their income. Paying yourself first protects against this trap by ensuring that saving becomes a non-negotiable part of your financial routine.

How to Start Paying Yourself First?

• The first step is to decide on the amount to pay yourself. Begin by calculating your monthly take-home pay and determining a realistic amount to set aside consistently before covering any other expenses.
• Once that’s established, automate the process. Whenever you receive your salary, immediately transfer a predetermined amount to your savings or investment account. Ideally, set up a standing order or automatic instruction with your bank or financial institution to make this transfer on a specific date each month; preferably on or shortly after payday.
• Direct this debit to an investment account that accepts additional deposits, such as a mutual fund or unit trust. Automation makes saving and investing effortless, helping you stay consistent and eliminating the temptation to skip it.

If your budget feels tight, start small. Even committing 5 to 10% of your income can make a big difference over time. The key is to build the habit first, then increase the percentage gradually as your financial situation improves. It’s also important to prioritize your goals. Decide what you’re saving for, whether it’s an emergency fund, retirement, or a home purchase. Labelling your savings helps reduce the temptation to dip into it for unrelated expenses. Lastly, keep adjusting as needed. Revisit your budget regularly to ensure your spending aligns with your savings goals, not the other way around.

Conclusion

Ultimately, paying yourself first is more than a budgeting technique; it’s a mindset shift that puts your financial future front and centre. It teaches discipline, encourages long-term thinking, and ultimately leads to freedom. Freedom from debt, from financial stress, and from the feeling that you’re always one step behind. It might feel challenging at first, especially if you’re not used to prioritizing savings. But over time, you’ll see that the sacrifices are worth it. Because every cedi you save today is a cedi that works for you tomorrow.

Start now. Your future self will simply say, Thank you!

About the author

Wendyliza Kwarteng is a certified Investment Advisor with a background in Economics and a master’s degree in development finance. She helps clients build and manage investment portfolios tailored to their financial goals. With expertise in investments and a client-focused approach, she delivers practical, growth-oriented financial solutions.