The personal finance world has taught me that paying one's self is a major priority. To me, being able to do that means I'm on the right path to financial growth. For 2 years, I was always in the red after every paycheck, which made it seem impossible to pay myself. With some discipline, paychecks just aren't the same anymore.
My starting salary after graduating college was around $40,000 and my total debts were around $70,000. My monthly expenses were more than my income, so I was in the red after every paycheck. For a few weeks in the years, I even had to use credit cards for some gas money. This meant I was in defense mode and only worried about paying off debt. I was shorting one bill to pay another, and that made budgeting really hard. As much as I thought about putting some money away for a rainy day, It seemed like a far fetched goal. Granted, I had a car payment I didn't need and I was going out almost every weekend. These decisions made it worse, and put me in a negative mindset that I was never going to reach my financial goals. That thought process was really damaging, because it put me in a downward spiral. As soon as a paycheck came in, I'd pay everything off and then I'd go out with friends to get drinks and food at restaurants. Splurging on these nightly outings was my way of paying myself.
I thought my only choice was to be defensive, but now, I'm breaking the cycle and going on the offense. I've learned that compounding interest is king and the earlier you start having money grow, the better. Even though I have a couple of retirement accounts, I'm severely lacking in the emergency fund department, so I decided to grow that as my offense strategy. I reevaluated how I pay myself, so now, I'm working on getting rid of the car payment and I don't go out for food and drinks every weekend anymore. The savings I get from these 2 things will be going towards debt and my emergency fund.
For me, there's no limit on how much emergency fund I should have. I started with the usual 3 - 6 months of expenses, but now, I'm planning on 3 to 5 years. I can't even yet comprehend the freedom this will give, but I'm excited to just start somewhere. I know I will need my funds to be ready to take out anytime needed, and it has to grow as much as possible. The local banks were offering about 0.10% annual yield, but I knew there had to be a better alternative, so I started doing some research and came upon online banks offering high yield savings accounts. Of all the options available, Ally Bank and Synchrony Bank stood out because there was no minimum to open an account and the yield was over 1%. They also give the option to make 6 withdrawals per statement cycle before a fee is added, and that made it attractive because that's just enough liquidity that I need. I ended up going with Synchrony, and have been benefiting from what I learned.
I've been putting away a small percentage of every paycheck into the account and it's been a great experience. Even though I've gotten a few pay raises and a new position with higher pay, I now understand I could have started right at the beginning. I should have had no car payment or gone out every weekend, and let those funds go to myself. Now that I know, I'm going to keep paying myself first by increasing my emergency fund, or rather as I like to call it now, my "me" fund. Paychecks don't have to go to everyone else. How do you pay yourself?