ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -“Pay Yourself First” means putting a specific amount of money in your savings or investment account before paying for anything else like bills, discretionary expenses, rent, etc. This one act of paying yourself first has helped many people come closer to financial freedom.

Detailed explanation-2: -When you pay yourself first, you pay yourself (usually via automatic savings) before you do any other spending. In other words, you are prioritizing your long-term financial well-being.

Detailed explanation-3: -What does “pay yourself first” mean? Paying yourself first simply means that you make it a habit to put money into your savings account first-as soon as you get paid, and before you have time to spend it on other things. By making saving your first priority, you make sure it gets done.

Detailed explanation-4: -The advantage of “paying yourself first” out of your paycheck is that you build up a nest egg to secure your future, and create a cushion for financial emergencies such as your car breaking down or unexpected medical expenses. Without savings, many people report experiencing a large amount of stress.

Detailed explanation-5: -Saving is setting aside money you don’t spend now for emergencies or for a future purchase. It’s money you want to be able to access quickly, with little or no risk, and with the least amount of taxes. Financial institutions offer a number of different savings options.