What does "pay yourself first" mean exactly? I've heard that term my whole life, but never understood what that well used phrase meant for my finances.

Wanderer wrote: Good point "pay yourself first" and adjust your standard of living. Good examples and a look at reality.

About 5 years ago when I came into my current job, my way of living was fine for me, so I calculated the difference between what I was making and what I would start making. From that point forward, I've been automatically putting the difference into my savings account. Not sure if it's 20%, but I've built up a decent nest egg.

I have always heard 70, 20, 10. Live off of 70%, save 20% and give 10%. This has been a challenge over the years and we could not do it a lot of the time. However, we are doing our very best to stick to the plan now. I just wish the interest rates were higher.

Good point "pay yourself first" and adjust your standard of living. Good examples and a look at reality.

Twenty percent is not unrealistic, but it can be hard. It all depends on your situation. If you are an adult making decent money and still live at home, 20% is very doable. If you are a single mom with 2 kids, 5% would make you a mathematical genius.

As the old saying goes, pay yourself first. After that number is decided upon, adjust your standard of living accordingly. That's what I do at least.

In my travels I have seen 10% which could also serve as your emergency fund too. Financial types like to incent us to put away as much as we can. One challenge is when you are young the money availability often isn't there to save and when we are older there are less work years available to save the needed retirement funds. Challenge ... the "how to"?

I was reading an article that suggested that well off persons have a habit of saving 20 percent of their pay. If you take that amount and add it to the 25% housing is supposed to be and the 30% the government gets, that is 75% of your earnings. Paying bills, buying clothes, gas, automobile expense, and entertainment if you actually get any is all supposed to be 25%? How in the heck are you supposed to live? Is the 20% savings a realistic number or just somebody's pipe dream?