GLOSSARY · BUDGETING, SPENDING & SAVING
Pay yourself first
A budgeting order in which a set amount moves to savings or investments as soon as pay arrives, before any discretionary spending, so that spending adjusts to what remains rather than saving depending on what is left over. It is usually automated through payroll or a scheduled transfer, which uses the power of defaults to keep saving going without a monthly decision.
Also called: save first, automatic saving, save first, spend the rest, anti-budget, reverse budgeting
COMPUTE IT WITH YOUR NUMBERS
LEARN IT PROPERLY
CHAPTER · BUDGETING METHODS & FUNDAMENTALS · FOUNDATIONSWhy Budgets Fail and How to Build One That LastsCHAPTER · BUDGETING METHODS & FUNDAMENTALS · FOUNDATIONSBuilding the Structure: Take-Home Pay, Order and AccountsRELATED TERMS
SOURCES
- The Power of Suggestion: Inertia in 401(k) Participation and Savings Behavior. Madrian & Shea, Quarterly Journal of Economics, 2001.
- Save More Tomorrow: Using Behavioral Economics to Increase Employee Saving. Thaler & Benartzi, Journal of Political Economy, 2004.