Which financial strategy helps ensure that savings goals are met?

• A. Spending first and saving leftovers
• B. Paying yourself last
• C. Paying yourself first
• D. Only saving bonuses or extra income

Answer: (C)

The strategy of paying yourself first is a highly effective approach to achieving savings goals because it establishes a priority for savings in your financial plan. By allocating a portion of your income to savings as soon as you receive it, you effectively ensure that you are consistently setting money aside for your future goals before spending on other expenses. This can help in building wealth, preparing for emergencies, and achieving long-term financial objectives without the temptation to skip saving during budgetary constraints.

When paying yourself first, individuals can automate their savings through direct deposit into a savings account or investment vehicle, which removes the effort of manually transferring money after expenses are accounted for. This contributes to a discipline in managing finances since it creates a systematic approach to saving.

On the other hand, strategies that involve spending first and saving whatever is left over, or paying yourself last, often jeopardize the chances of meeting savings goals. This is because spending can surpass income, leaving nothing to save. Similarly, relying solely on bonuses or extra income to save can lead to sporadic and insufficient contributions to savings, diminishing the stability and growth of one's financial portfolio. Thus, the strategy of paying yourself first creates a strong foundation for consistent and effective savings.