Is “Pay Yourself First” Still the Best Rule? | Throwback Tuesdays

“Pay yourself first” is one of the most popular rules in personal finance. And to be fair, it’s popular for a reason: it’s simple, memorable, and it works.

But what if saving 10% isn’t enough?

In this Throwback Tuesday snippet, Bryce and Ben unpack why the classic “pay yourself first” rule might still leave room for lifestyle creep… and how trapping more of your surplus can help you put your money to better use.

For the original episode, tune in here: Episode 191| Seven Steps to Make Money Simple Again. 

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Transcript

SPEAKER_00 0:02

We often get people recognized saying you have not obeyed the law of paying yourself first. And we get that. And we do that on purpose, Ben. So we're not saying that it's a bad philosophy, but what we're saying is if you pay yourself first, you run the risk of upping your expenses. So if you've got a pay rise of a thousand bucks, you pay yourself as you said 10%. That means you're giving yourself freedom to, you know, of the 10%, there's a hundred, there's nine hundred left over, and you can increase your expenses. So all of a sudden you get a fancier car and all of a sudden you go on fancy holidays. Our system is is what it's saying is maximise your surplus, and if you've got baseline sorted out here and you end up with a thousand dollar pay rise, that thousand dollars goes straight into the primary account, which goes straight into the savings bucket, which therefore means that you've trapped it all. So saved interest, you've made that money. You have paid yourself first, but not only have you paid yourself 10%, you've paid yourself 100% of it because you can trap it all.

SPEAKER_01 0:56

So that was my first money management system, Bryce. The pay yourself first principle is what got me to save up for my first property at 23. Um, but we iterate and we get better. And and that was in the day when, you know, you know, in in my late teens when I was working, I used to get the pay packet. You know, we talked about that on the Facebook Live, we did a couple of weeks ago. So from that point of view, that that's that message there. So the pay yourself first is I think you summed it up beautifully. You are, and that money's working harder for you because that that money has a better job to do than thinking about the 10% you're trapping. It's actually the you potentially could be trapping 40, 50, 60, 70, even 100% of that. Because if you think about it logically, if you didn't need that money in the first instance, that money could go down and retire that debt quicker. Absolutely. And so I want to circle back to your point around the case studies. The case studies tell the story, but they give a numeric number value as the outcome. So we build the case studies in terms of introducing you to someone, here's their backstory around income expenditure and their life story, and then we give them stories around well, what if they did debt snowball? What if they, you know, they did a different way, what if they could trap an extra hundred dollars of their discretion? And we can show the monetary saving in that particular household, and then right to case study four, it's like, okay, what if I put that money to work and how much extra money am I going to have for retirement and my financial, my financial piece?

SPEAKER_00 2:24

Bill Zeng used to talk about this concept called the cup size, Ben, and he said, if you can imagine at the beginning of your career you earn, let's just say you earn a thousand bucks a week, who knows, maybe too much, and your expenses are 900. So you've got a hundred dollar gap, and then next year you uh you know you're on 1500, but you still maintain that $100 gap. What it means is you're not trapping enough surplus over time because all you're doing is increasing your expenses. Our system means that as your income increases, your expenses can still flatten out. Obviously, if you get more income, you might get a nicer car and a nicer home, but it means that your expenses aren't keeping the same trajectory as your income. You're actually flattening out the expense graph, and that's the important thing because if you can trap the surplus, you can do more with it. So