# Building it without pain: pay yourself first > Pay yourself first: automatic saving on payday instead of saving what is left, with a fixed sum for a salary and a percentage for irregular income. - Course: [Personal Finance: Budget, Safety Cushion, Debt and Investing](https://productovi.com/courses/personal-finance.md) - Module: What if the income stops? - Lesson 7/32, ~18 min - Source: https://productovi.com/courses/personal-finance/pay-yourself-first ## Saving what's left doesn't work **Alex Tutor:** Sam's family again, a few days after payday, and Sam has news about the 1,000 UAH transfer. **Sam:** On the 5th, 1,000 moved to the savings account by itself. Honestly, we didn't feel it. I expected it to hurt more. **Alex Tutor:** That's the whole trick. Before, saving came last, out of whatever was left on the 4th. In September what was left was minus 6,558. **Alex Tutor:** **Pay yourself first** flips the order: on payday the saving moves before any spending, and the month is planned around what remains. Every purchase used to compete with saving and win. Now it can't. **Sofia:** And 1,000 is a small share of 56,000 coming in. > **Exercise:** Sam's family moves 1,000 UAH to savings out of 56,000 UAH of monthly income. What **share of income** is that? Round to two decimals. ## Make it automatic **Alex Tutor:** Four details decide whether it lasts. The transfer runs on payday, not on the 25th. It is a standing order, not a decision you make each month. **Alex Tutor:** The money lands in a separate account, ideally in the second bank, with no card attached. And the account has a name and a number: "Cushion, 10,000 by July". **Sam:** Why no card? I would never spend it. **Alex Tutor:** Everyone says that. One extra step between you and the money is often enough on a tired Friday. The point is to make saving easy and spending it a little harder. > **Exercise:** Put the steps of setting up an automatic saving habit in order. ## How long will it take? **Sofia:** At 1,000 a month the starter cushion of 10,000 takes ten months. One month of essentials, 42,935, would take more than three years. **Alex Tutor:** Turn it around: pick the date, then work out the monthly amount. Target divided by months. If the answer doesn't fit the plan, move the date, not the habit. **Sam:** And when the washing machine is paid off in January, that 1,250 is free. Straight into savings? **Alex Tutor:** Freed money is the easiest raise you will ever get, because you already live without it. While there is a credit card at 3.2% a month, it may do more there. Module 3 does that sum. > **Exercise:** Sam's family wants one month of essentials, 42,935 UAH, saved in **18 months**, starting from zero. How much must move to savings each month? Round to the nearest hryvnia. ## Dana: a percentage, not a fixed sum **Dana:** A fixed 3,000 a month would be easy in March and impossible in July. My income moves; my saving would have to move too. **Alex Tutor:** Then save a percentage of every payment. Klasna pays you twice a month: the day a payment lands, 10% of it moves to the cushion account. A thin month saves less, a great month more, and the rule never breaks. **Dana:** Before or after the tax money? **Alex Tutor:** The tax share is set aside separately the same day; module 4 sizes it. The 10% is on top. Last year you earned 430,000 UAH. Ten per cent of that is a cushion that grows without a single decision. > **Exercise:** Dana earned 430,000 UAH last year. If she had moved **10% of every payment** to her cushion the day it arrived, how much would she have saved over the year? ## Check it, then raise it **Sofia:** Once it is automatic, can we forget about it? **Alex Tutor:** Almost. Look at it every three months. If the transfer keeps pushing you onto the credit card before payday, it's too big: lower it, don't stop it. If the month ends with money left over, raise it. **Sam:** So saving 1,000 and then borrowing 1,000 on the card at the end of the month is not saving. **Alex Tutor:** It's moving money from one pocket to a more expensive one. The habit only counts when the month still closes without the card. > **Exercise:** **True or false:** if the automatic 1,000 transfer forces the family to borrow on the credit card before payday every month, the transfer should be lowered rather than kept as it is. ## Your turn: Dana's rule **Dana:** Write me the rule as I would set it up: what moves, when, where to, and what I do in July and in March. **Alex Tutor:** Keep it short enough to set up in the bank app in five minutes. Numbers, not wishes. **Sofia:** And one line on when to change it. **Alex Tutor:** Yes. A rule with a review date survives longer than a perfect one. > **Exercise:** Write Dana's saving rule in 2–4 sentences, ready to set up: what share moves, when, to which account, what happens in a thin month like July (15,000 UAH) and a strong one like March (52,000 UAH), and when she reviews it. Her taxes are set aside separately. > **Key ideas** > > - **Pay yourself first**: the saving moves on payday, before spending, as a standing order. What's left at the end of a month is usually nothing; in September it was minus 6,558. > - Make it automatic: payday, a separate account (ideally in a second bank), no card attached, a name and a target. > - Choose the date, then the amount: target ÷ months. 42,935 in 18 months is about 2,385 a month. If it doesn't fit, move the date, not the habit. > - Irregular income saves a **percentage** of every payment: 10% of Dana's 430,000 year is 43,000 UAH, more in March, less in July. > - Review every three months: lower the amount if it pushes you onto the card, raise it when a payment ends or income grows. **Alex Tutor:** Next: Dana's case. A thin summer, a war, and a plan for her cushion. - Previous lesson: [Where to keep it: access, currency, several banks](https://productovi.com/courses/personal-finance/where-to-keep-it.md) - Next lesson: [Case: Dana builds an emergency fund for summer and war](https://productovi.com/courses/personal-finance/cushion-plan-case.md) --- Productovi Learning. Free, no sign-up needed to read.