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WalletPrep worksheet · Money basics

What does pay yourself first mean?

Name ____________________ Date __________

Key ideas

  1. Savings moves first, on the day you're paid. Schedule the transfer for payday or the day after. Bills and spending come out of what is left.
  2. Start with a percent you can keep. 10% of take-home pay is a common target. If that is too much, start at 5% or $25 and raise it later.
  3. Automate it so you never decide again. A recurring transfer or a split direct deposit does the work. Willpower only has to show up once.

Vocabulary

Pay yourself first
A saving habit where a set amount moves to savings on payday, before you pay bills or spend anything.
Take-home pay
The money that actually lands in your bank account after taxes and payroll deductions come out of your paycheck.
Split direct deposit
A payroll setting that sends part of each paycheck to one account, such as savings, and the rest to another.
Credit union
A not-for-profit financial cooperative owned by its members, offering checking, savings and loans much like a bank.
FDIC insurance
US government protection that repays your deposits if an insured bank fails, up to $250,000 per depositor, per bank, per ownership category.
Emergency fund
Cash set aside only for surprises like a job loss, a car repair or a medical bill. A common goal is 3 to 6 months of essential costs.

Work it out

Nia takes home $3,200 a month in two $1,600 paychecks. Her rent, utilities, phone, insurance and minimum debt payments come to $1,900. She has never saved on purpose.

  1. Monthly take-home pay
  2. Pay yourself first (10%)
  3. Left for bills and spending
  4. Fixed bills and minimums
  5. Left for everything else
  6. Saved in 12 months ($320 × 12)
  7. Interest at an assumed 4% APY
  8. Balance after one year

Check yourself

  1. What does paying yourself first change?

    • A. It saves money before bills and spending
    • B. It skips bills so savings can grow
    • C. It saves whatever is left at month end
    • D. It puts all savings into stocks

  2. You take home $2,600 a month and want to pay yourself 5% first. How much is that each month?

    • A. $52
    • B. $260
    • C. $130
    • D. $520

  3. Which setup makes paying yourself first most automatic?

    • A. A reminder to move money when you remember
    • B. Moving money at the end of each month
    • C. Keeping savings inside your checking account
    • D. A split direct deposit into a separate savings account

Your turn

Log in to your payroll portal and look for direct deposit settings. Add your savings account with a fixed amount from each paycheck, even $25. If there is no split option, schedule a recurring transfer for the day after your next payday.

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Answer key

What does pay yourself first mean?

Work it out

  1. Monthly take-home pay$3,200
  2. Pay yourself first (10%)− $320
  3. Left for bills and spending= $2,880
  4. Fixed bills and minimums− $1,900
  5. Left for everything else= $980
  6. Saved in 12 months ($320 × 12)$3,840
  7. Interest at an assumed 4% APY$71
  8. Balance after one year= $3,911
  1. Nia sets a split direct deposit of $160 from each paycheck. That is $3,200 × 10% = $320 a month, gone before she sees it.
  2. She lives on $3,200 − $320 = $2,880. After $1,900 of bills, $980 covers groceries, gas and fun.
  3. In a year she puts in $320 × 12 = $3,840. At an assumed 4% APY it grows to about $3,911. Savings rates change, so her real figure may differ.

Check yourself

  1. A. It saves money before bills and spending You still pay every bill. You just move savings out first, on payday, and live on what remains.
  2. C. $130 $2,600 × 5% = $130 a month. Paid twice a month, that is $65 from each paycheck.
  3. D. A split direct deposit into a separate savings account A split direct deposit sends part of every paycheck straight to savings, so you never have to decide again.