How to Build Wealth While You Are Young: Pay Your Future Self First

One of my favorite financial tips for people, both young and old, is “Pay Your Future Self First.” I truly believe that following this one basic rule can set you up for financial success throughout your life. It can be especially powerful for young people because the younger you are when you start to implement this philosophy, the more likely it is to become a habit. And forming healthy financial habits sooner rather than later is a win in my book.

The concept is relatively simple: Anytime you receive a boost in income or assets, before doing anything else with the funds, set at least some of it aside—thereby paying yourself before spending on other things. In the most basic terms, paying your future self first means you’re choosing to invest in yourself and your goals for the future.



As we approach the end of yet another year, for many people, this may mean that bonuses or raises are on the horizon. This is the perfect time to put the “Pay Your Future Self First” philosophy to work. Let’s say, for instance, you find out you are going to receive a 3% raise starting January 1. Rather than taking the full 3% of additional pay as a cost-of-living increase in your checking account, carve some off the top—say, 1%—and use it to pay your future self, thereby receiving a lesser 2% “raise” in your cash flow.

Making financial adjustments that coincide with changes in pay like raises or bonuses is a great way to increase your savings without feeling like you’re giving anything up. With this in mind, let’s talk about a few of the most common and practical ways you should consider putting your money to work for you if you find yourself in the fortunate position of receiving a bonus, raise, or another financial windfall.

Boost Retirement Savings

Paying your future self first when it comes to retirement savings is a great way to work toward maximizing savings for retirement without feeling like you’re sacrificing a lot over time. It can also be one of the easiest ways to implement our rule of thumb, especially if you have a retirement account through your employer.

I say this because if you have the option of having retirement savings automatically deducted from your paycheck, you can increase your retirement savings, and the additional income will never even end up in your checking account—you’re less likely to miss it!

Get in the mentality of automatically increasing the percentage you’re socking away in your 401(k) anytime you receive a raise or bonus, and you will be well on your way to achieving your retirement savings goal.

Fund a Health Savings Account

If you have a high-deductible health plan, you are likely eligible to contribute to a health savings account (HSA). An HSA is a tax-advantaged savings/investment account designed to help workers save money for medical expenses.

HSAs have some pretty awesome benefits, including being triple-tax-free: Contributions go in tax-free, your money grows tax-free, and withdrawals are tax-free as long as they are used for qualified medical expenses. Funding an HSA is a great way to set money aside to cover medical expenses and receive a tax benefit for doing so.

Add to an Emergency Fund

It’s always a good idea to have funds set aside in case of an emergency. Having some cash in a savings or money market account will help to ensure you don’t default to other less-than-desirable options (like credit card debt) if an unexpected expense arises.

If your emergency savings is lacking, use an opportunity like a raise or bonus to direct some of those dollars to your emergency fund. Most times, you can have a set amount of your paycheck direct deposited to a savings account—making the process of building your emergency savings as automated as possible.

If the money never flows through your primary checking account, you will never have the opportunity to inadvertently spend it!

Pay Down Debt

Accelerating debt payoff can make a lot of sense, especially if you have credit card debt or other loans at high interest rates that are making it difficult to overcome. Directing an additional amount toward debt payments can have immeasurable benefits over the long term, and getting debts paid off will not only feel great but will free up even more cash flow to put toward other financial goals.

Creating a habit of paying your future self first is a simple way to work toward reaching your future financial goals. It may sound simple, but many times, it can be difficult to save today for something you may not enjoy for many years to come (like retirement). Don’t put savings off, or you may end up in a situation 10 years down the road wondering where the time went with little to show for it financially.

Start implementing this healthy financial habit today, and you can be on the path to success before you know it!

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Elizabeth Young, CFP®

As Partner and Senior Wealth Advisor, Elizabeth Young finds it gratifying whenever one of her clients reaches a long-held goal with her help and guidance. Those “aha” moments drive the work she does for our firm, including serving as the primary financial planning contact for clients and overseeing general client service.