The Magic Math of Paying Yourself First

When my husband and I first started building a life together in our 20s, we treated our money the way too many young couples do: We bought what we wanted, made an unenthusiastic effort to save, and crossed our fingers that everything would work out for the best.

Not surprisingly, things didn’t always turn out that great. While we were never poor and always earned more than enough to get by, our lack of planning led to less-than-stellar results.

Every month, we spent haphazardly then hoped and prayed we would have money left over to save or pay down debt. Over time, however, we realized our “strategy” was nothing but a sham. Because we didn’t make saving and debt repayment a priority, it mostly fell to the wayside.

Our Journey Into Zero-Sum Budgeting

The revelation that we weren’t living up to our potential is what led us into zero-sum budgeting. (I’ve become so passionate about it ever since that I even authored a book on the subject).

Zero-sum budgeting gives you the tools to improve your finances by teaching you how to a) live off last month’s actual income instead of income projections, b) make actionable decisions regarding your money, and c) reduce waste. Best of all, to get started, you only need a pen, paper, and the drive to succeed.

If you’re struggling with money, I highly suggest you give zero-sum budgeting a try. You have nothing to lose, and you don’t need to buy anything to at least give it a shot.

The thing is, if you hate the idea of the dirty “B word,” you don’t even need to budget to make progress. One lesson from zero-sum budgeting is so powerful that it can transform your finances on its own if implemented right away.

While zero-sum budgeting teaches you to cut wasteful spending and make better decisions with your money, its main goal is forcing you to prioritize your spending goals. As a result, zero-sum budgeting requires you to pay your savings, investments, and debts as if they were regular bills.

Instead of treating your savings and credit card debt as an afterthought, to be paid with whatever’s left at the end of the month, you pay them first.

The Magic Math of Paying Yourself First

I call this the “magic math” of paying yourself first. It’s not rocket science, and I certainly didn’t invent the idea, but I am totally obsessed with the results of this single budgeting tip.

When you pay yourself first, you don’t have as much money left over to waste. Your savings, investments, and debt repayment obligations were paid already, so you’re forced to actually “live” on the rest.

Here’s a good example of how this magic works:

Let’s look back at me in my old life! Back in 2007, my husband and I were earning around $75,000 per year combined.  That’s a lot of money, but not enough to keep us clear of foolish financial mishaps. After paying taxes and insurance and throwing money into retirement, our take-home pay was around $4,000 per month.

We spent all of that and more easily. Not only was our house payment around $1,200 at the time, but we had $800 in car payments every month.

With about half of our income left to spend, we paid around $400 to our credit card bills each month and spent around $1,000 on food and dining out. That left $600 monthly to blow, which we did on all sorts of things – home remodeling projects, gas, entertainment… you name it.

At the end of each month, all of our earnings were gone… and sometimes we actually added to our credit card balances, too. Here’s an approximation of how our finances might have looked during a month we broke even:

  • Mortgage: $1,200
  • Car payments $800
  • Credit cards: $400
  • Food and dining: $1,000
  • Cable and internet: $100
  • Gas, entertainment, miscellaneous: $500

Total: $4,000

And keep in mind, there were months when we spent a lot more than what we brought in, causing our credit card balances to balloon over time.

Then we learned about zero-sum budgeting, and what a transformation it was. All of a sudden, we were forced to give our bills and savings the respect they deserved, and then try to live on the rest.

For us, that meant a few things:

  • We needed to cut our food spending in half because it was outrageous, so that’s what we did.
  • We needed to get on a bare-bones budget and cut all extra spending from our lives for a while. For us, that meant cutting cable television and staying home instead of going out.
  • We needed to make debt repayment and saving a priority and quit treating them as optional.

Once we learned these painful truths, we set out to create a zero-sum budget that would help us reach our goals. It wasn’t much fun for a while, but we managed to make it work. Here’s how our first few zero-sum budgets looked for a while:

  • Mortgage: $1,200
  • Car payments $800
  • Credit cards: $1,000
  • Food and dining: $500
  • Cable and internet: $50
  • Gas, entertainment, miscellaneous: $200
  • Savings: $250

Total: $4,000

Keep in mind, this is just an estimate of how things went. But, you get the point. Zero-sum budgeting forced us to reconfigure our spending in a way that helped us reach our goals. During this time, we also quit using credit cards for spending. That way, our huge monthly payment was going directly toward our balances without us adding a dime.

Since we were paying so much cash toward our credit cards, it didn’t take long – less than six months – to pay them off. After that, we redirected that $1,000 toward paying off our cars early and boosting our cash savings.

Also notice that we started actually saving money right away – even while we were paying down debt. This was huge for us because it meant we could start building a much-needed emergency fund.

After another year, we paid off the remaining balances on our cars and became entirely debt-free, aside from our mortgage. From there, we were able to save a lot more, boost our retirement savings, and continue living a debt-free, stress-free lifestyle.

Years later, we’re still doing the same thing. The only difference is, our primary residence is almost paid off and we save a ton more for retirement, college savings, and other goals. Of course, it helps that we earn more now, too.

The Bottom Line

This is the magic of paying yourself first. When you make savings and debt repayment a priority, you have to learn to live on the rest — forcing you to make hard choices and prioritize your spending on what truly matters to you.

Zero-sum budgeting demands that you spend less money and save more over time. But, even if you don’t want to budget, the magic of paying yourself first can work. Pay your savings and credit card bills first, then learn to live on the rest for a while to see how it goes.

When you put your future and your financial goals first, you have no choice but to rethink everything and get your butt in gear. We have this one life to live, and we have to make it count. By paying yourself first, you can make sure the life you have is free from debt and stress, and full of hope for the future.

For us, this simple change has meant the difference between a life of struggle and the life of our dreams.

Holly Johnson is an award-winning personal finance writer and the author of Zero Down Your Debt. Johnson shares her obsession with frugality, budgeting, and travel at

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Holly Johnson

Contributing Writer

Holly Johnson is a frugality expert and award-winning writer who is obsessed with personal finance and getting the most out of life. A lifelong resident of Indiana, she enjoys gardening, reading, and traveling the world with her husband and two children. In addition to The Simple Dollar, Holly writes for well-known publications such as U.S. News & World Report Travel, PolicyGenius, Travel Pulse, and Frugal Travel Guy. Holly also owns Club Thrifty.