Pay Yourself First: A Simple Habit That Builds Wealth

In his book Money: Master the Game, Tony Robbins shares a powerful concept: set a savings target as a percentage of your income - whether it’s 10%, 15%, or even 20%.  

The exact number is up to you and your personal circumstances. What matters most is your commitment to that number, through both good times and bad. 

Why is this important? Because missing even a single deposit or contribution to your fund can disrupt the compounding process and compounding is where real wealth-building happens. 

The key to success is automation. When your savings are set up to happen automatically, you remove willpower and decision-making from the equation. As author Burton Malkiel puts it, the best way to save is when you never see the money in the first place. 

So here are the key ideas: 

• Commit to a fixed savings percentage from every pay run. 

• Automate your savings so it happens without effort. 

• Pay yourself first - take your savings out before you spend on anything else. 

• Let compound interest work its magic over time. 

  
  

  

  
  

Step one is to decide what percentage of your income you’ll set aside - for your future, for your family, and for your financial peace of mind. Once you’ve made that decision, the next step is to explore the best ways to automate the process. 

Building on my previous article, RBA Rate Cut = A Pay Rise for Mortgage Holders. What's Your Financial Next Step? I’ll share three practical examples of how you can put this strategy into action.    

If you feel like you can’t find the money, the recent interest rate cut in Australia by the RBA (and more cuts forecast), has effectively handed you a pay rise.  The key is to take action before those savings “disappear”.    

Many of our clients following a structured Financial Freedom Plan are taking advantage of this opportunity by:  

OPTION 1: Maintaining their original (higher) mortgage repayments 

→ Accelerating debt reduction and building equity faster. 

HOW: Use Online Banking Settings to Automate Fixed Repayments 

Instead of adjusting repayments every time interest rates change, you can simply set up a recurring transfer for a fixed amount through your bank's online banking system. 

All the major banks such as CBA, Westpac, ANZ, NAB, Macquarie support this feature via their internet banking or mobile apps. 

By keeping your repayments at the pre-rate-cut level, the extra money either: 

• Reduces the principal faster, saving you interest, or 

• Accumulates in a redraw facility or offset account, depending on your loan type. 

OPTION 2. Investing the difference (the extra money) 

→ Diversifying into other asset classes and building liquidity. 

HOW: Use automated investing apps to get started 

Here are three of the most popular: 

1. Raiz Invest: Raiz is a micro-investing app that automatically invests your spare change into a diversified ETF portfolio.  

Unique feature: Round-up investing – it links to your bank account and invests your digital spare change from everyday purchases. 

 2. Spaceship Voyager: Spaceship offers easy access to growth-focused portfolios, particularly in global tech and innovative companies.  

Unique Feature: Zero minimum investment – you can start investing with as little as $0, making it ideal for beginners. 

3. Stockspot - Stockspot is a full-service robo-advisor that builds and manages diversified ETF portfolios tailored to your risk profile. 

Unique Feature: Automatic rebalancing and tax optimisation – a fully hands-off, set-and-forget investment solution. 

OPTION 3. Contributing extra to super 

→ Reducing tax and strengthening their retirement nest egg. 

HOW: Setup a regular automatic contribution to super  

The Two Simple Ways to Boost Your Super Regularly 

1. Salary Sacrifice (Before-Tax Contributions) 

How it works: 

Salary sacrifice means asking your employer to send some of your before-tax pay directly into your super instead of your bank account. This happens automatically each pay cycle. 

The benefit: 

Because the money goes into super before income tax is taken out, it’s generally taxed at a lower rate than your normal income. That means more of your money stays invested for retirement. 

How to set it up: 

• Decide how much of your pay you want to contribute. 

• Contact your payroll or HR team to set it up. 

• The money is deducted before tax and sent straight to your super fund. 

  
  

Who it suits: 

People on a moderate to high income who want a tax-effective way to grow their super. 

2. After-Tax (Non-Concessional) Contributions 

How it works: 

After-tax contributions come from your take-home pay - money that’s already been taxed. You manually transfer funds into your super account when and how often you choose. 

The benefit: 

This money goes into your super without any extra tax, and it keeps growing in your super fund’s low-tax environment. 

How to set it up: 

• Log in to your super fund’s website or app. 

• Use BPAY or a bank transfer to make a personal contribution. 

• If you want to claim a tax deduction, submit a form to your fund. 

  
  

Who it suits: 

People with extra savings who want to top up super and may have used up all their yearly limits for their concessional (before-tax) contributions. 

The key to success? Automating your savings strategy. 

As fiduciary financial advisers, we help our clients make confident decisions with their savings and stay on track toward their long-term goals. 

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Alternatively, book a free 15-minute consultation here to discuss your specific situation and explore how to optimise your retirement plan with an experienced fiduciary advisor now.

Find out more about how we can help: Fiduciary Advisor - Simon Shepherd | Providence Advisory Group