Pay Yourself First: Building Financial Freedom

I first came across the concept of “Pay Yourself First” in The Barefoot Investor by Scott Pape back in 2016. At the time, I was saving for my first home deposit and had opened an online savings account with the best interest rate I could find. No frills, no fees.

That simple principle, paying myself before paying anyone else, reshaped how I thought about money. As a sole trader, I’ve also had to prioritise making my own superannuation contributions.

Money Buckets

Over time, I built a system of “money buckets” across different online banks. Each one has a clear goal. All fee-free. Some are for travel, some for gifts for family overseas, others home maintenance and occupational expenses. It’s the same idea behind sinking funds: setting money aside for a known future expense, so it’s already there when the bill lands.

Staying Consistent on the FIRE Journey

When I started exploring the FIRE (Financial Independence Retire Early) movement, I wasn’t sure where to begin. I knew one thing though: my savings needed to be invested. That’s the key to building financial wealth.

I liked Vanguard Personal Investor. It let me set up fortnightly direct debits, a true “set and forget” approach. The minimum to start was $200 a fortnight. Back then, only their Index Funds that were available to auto-invest into.

Later on, I added Pearler. It offers an auto-invest feature for Exchange Traded Funds (ETFs). Each week, a set amount is deducted. At the end of each month, the total gets invested automatically. I’ve made a commitment to invest consistently each month, come rain or shine.

What Pay Yourself First Looks Like

Here’s how I’ve structured my system to make sure I adhere to pay yourself first principle:

• Each fortnight: a direct debit contribution to Vanguard Personal Investor
• Each week: a set amount to my Pearler account, which auto-invests monthly into an ETF
• Each week: voluntary personal superannuation contributions

Do you have your own pay yourself first system?