There is one simple habit that all financially successful people do–they pay themselves first.

That phrase has always annoyed me.  Pay myself first?  What exactly does that mean? I heard financial gurus say that phrase over and over, and it just came off as cocky and glib.

“Want to become rich boy?  Well, it’s simple. Just pay yourself first!”  What?  You can’t just pay yourself into wealth. You have to create the wealth.  Build the business. Land the great job. Earn the money, and THEN you save money and become rich.  Right?

Wrong. Want to get rich? Pay yourself first. Want to pay off the mortgage in retire with money in the bank? Then pay yourself first. Have financial problems? Pay yourself first.

In fact, the less money you earn the more important it is to pay yourself first.

We feel frustrated because we sense time blowing past us and it’s becoming apparent that our financial goals are not being met. The mortgage balance is not going down. In fact, we may even owe more than when the home was purchased because we borrowed against the home to consolidate bills. The retirement nest egg is almost to zero because we keep raiding it to cover all those unexpected jams we got ourselves into and at midlife there is nothing in the pot.  An eerie sense of doom pervades and now panic is starting to set in.

Pay yourself first. The anxiety bells fade away when you pay yourself first.  Problems will still exist–problems will always exist–but instead of living with a sense of running out of time to accomplish your financial goals in life you will sense that goals are being accomplished despite the nipping bites at your heels from the unavoidable day to day hazards of being alive. Pay yourself first.

What does it mean to pay yourself first?

It starts with identifying your goals.  Where do you want to wind up? For most of us, that question is not difficult to answer. At the end of our working day we want a decent home paid in full and some money in our retirement accounts so we can slow down and enjoy grandchildren and retirement and maybe take a trip to the beach when Nebraska’s winter kicks us in the butt.

Once you define your goals, the next step is simple.  What do you have to do every payday to achieve your goals and stay out of financial trouble? How much do you have to set aside every payday to pay off the mortgage in 10 years instead of 20? Find out and start paying that now–before you pay other debts.  How much money do you want in your retirement account at age 65? Start funding your retirement account NOW to make that happen before you worry about paying off your debts.  Pay yourself first. Put your priorities first. Put your family’s needs first before paying VISA and MasterCard.

Most people who wind up in a shitty retirement earned plenty of money in their life to retire a millionaire. But they didn’t put their needs first.  Instead, they cashed in their retirements to pay off debt.  They put a 2nd mortgage on the house to consolidate bills only to run up the credit card accounts again.  And all of it was for a good reason. Johnny needed a better bed so you used the credit card. Susie showed talent at piano so of course we have to borrow from the 401(k) to pay for lessons. And the list goes on.  All good reasons to spend money. Just helping the family out. Just being a good spouse or parent and supporting others in their needs.  Just doing what is right.  And, little by little, day by day, putting other people’s needs before your own.  Paying yourself LAST.  That’s how you wind up old and poor.

Paying yourself first is not being selfish. It’s necessary.  It’s the responsible thing to do. I’m not saying to be a complete jerk and to avoid paying rightful debts. Rather, I’m advocating that you balance your legitimate needs with the claims of your creditors.  And when balancing your needs and their claims, pay yourself first. Pay creditors AFTER you have paid extra on the mortgage, saved for retirement, paid into the emergency savings account, paid your taxes, funded your vacation fund, and contributed to your church. What’s left over belongs to them.

So what do you do when you pay yourself first and  there is not enough money to pay the creditors? You deal with it. You take on a second job. You cut unnecessary expenses. You call a family meeting and lay the problem out honestly and completely to every human in the house. You get professional advice. You seek out people you respect and get their input. Maybe you chat with a bankruptcy attorney or credit counselor. But what you don’t do is to stop paying yourself first.  You keep paying extra on the mortgage.  You keep paying into the retirement and keep your damn fingers off the funds already saved. You keep paying into the vacation account. And you figure out the problem somehow.  It doesn’t matter how. What does matter is that you rightfully keep your family’s priorities and dreams in first place and let everything else come second.

Life is just one problem after another.  They keep coming and as we age they sometimes get worse. That’s just a fact of life. And over time, what seemed like a big problem at the time just looks a lot smaller in the rear view mirror of life. Don’t sweat the problems. Focus on the goals.  Pay yourself first and reach your financial dreams. You owe it to yourself. You owe it to your spouse and children.  That’s not being selfish.  That’s being responsible. Just do it.