March 2007, I officially joined the workforce. At the end of the month, I received my salary and the first thing that popped into my head was, “how can I spend it?”. Back then, I knew very well my fixed expenses were rent, car loan, and petrol. After paying or keeping aside these expenses, I roughly knew how much left for me to maintain my monthly “lifestyle”, which includes the standard food, dining out and entertainment expenses. Savings was least of my concern.

Over the years, as I was progressing well in my career, I had the opportunity to switch jobs and received decent increments. Whenever my salary increases, the very first thing I do was to plan on spending it. Naturally, I started accumulating more fixed expenses. From prepaid mobile line, I switched to postpaid, started subscribing to Astro, broadband plus gym membership. There were other expenses as well, but you get the idea, my expenses kept growing as my income increases.

Noticed how the first thing I did upon receiving my salary, I planned on spending it. I didn’t ask the most basic yet critical question, “how much I’m keeping aside for savings”. To be honest, I hardly had any savings because it wasn’t a priority as I wasn’t aware of its importance. Only during an emergency, I knew the need for savings.

A few years ago, a good friend of mine asked me a question, “when was the last time you paid yourself first?”. I was confused by the question because my employer is already paying me. I wasn’t sure what he was getting at, so I probed him further. He went on explaining the following.

Normally, when we received our income, we tend to pay everyone else first. He had a point. In my case, the moment my salary was banked in, I was already paying my income tax, my landlord, my car loan, and bills. Only at the end, I think about savings, if any left. According to him, savings is “pay yourself first”. We should always “pay ourselves first”, only then we think about our expenses.

Previously, I was following the below formula. The problem with this formula, as my income grew, so did my expenses.

Income – expenses = savings (if any left)

My friend suggested following the below formula instead. This is to ensure as my income grew, my savings increases as well.

Income – savings = expenses

Income – “pay yourself first” = expenses

I’ll admit, I wasn’t able to implement this formula straight away, as my expenses were pretty high. I was patient enough to wait for my next salary increased. The moment I knew how much extra I was getting, instead of thinking on how to spend it, I knew very well I must “pay myself first”. I finally started my journey towards savings.