Many people work hard every day, earn a salary, pay their bills, settle debts, and then spend whatever remains. Unfortunately, for most people, there is usually very little left at the end of the month.
In his bestselling book, Rich Dad Poor Dad, Robert Kiyosaki introduces a simple but life-changing financial principle: Pay Yourself First.
This concept challenges the traditional way most people manage money and offers a path toward financial independence and long-term wealth creation.
What Does "Pay Yourself First" Mean?
Paying yourself first means setting aside a portion of your income for savings and investments before paying bills, buying goods, or spending on entertainment.
Instead of following this pattern:
Income → Expenses → Savings
You follow this pattern:
Income → Savings/Investments → Expenses
The idea is simple: make your future financial security your first priority rather than your last.
The Difference Between Rich Dad and Poor Dad
In Rich Dad Poor Dad, Robert Kiyosaki compares the financial thinking of his two father figures.
Poor Dad's Approach
His "Poor Dad" believed in:
- Working hard for a salary
- Getting a secure job
- Paying bills first
- Saving whatever remained
Although educated and hardworking, Poor Dad struggled financially because most of his income went toward expenses and liabilities.
Rich Dad's Approach
His "Rich Dad" believed in:
- Building assets
- Creating multiple income streams
- Investing before spending
- Making money work for him
Rich Dad taught that every paycheck should first contribute to acquiring assets that generate future income.
Why Paying Yourself First Works
1. It Builds Financial Discipline
When you automatically save or invest a portion of your income, you learn to live within your means.
Rather than spending first and hoping to save later, you create a habit that strengthens your financial future.
2. It Creates Investment Capital
Savings alone rarely create wealth.
However, savings can be invested into:
- Businesses
- Stocks
- Bonds
- Real estate
- Retirement funds
- Income-generating projects
These investments can generate additional income and increase your net worth over time.
3. It Protects Your Future
Unexpected events such as job loss, illness, economic downturns, or emergencies can happen to anyone.
A person who consistently pays themselves first builds a financial cushion that provides security during difficult times.
4. It Harnesses the Power of Compounding
Money invested today can grow significantly over time.
Even small monthly investments can become substantial wealth when allowed to compound for many years.
For example:
- Saving $50 per month for 20 years creates a significant fund.
- Saving $200 per month for 20 years can transform your financial future.
The key is consistency.
How Much Should You Pay Yourself First?
There is no single rule for everyone, but many financial experts recommend saving:
- At least 10% of income
- Ideally 15–20% if possible
If your budget is tight, start with 5%.
The most important thing is to begin and remain consistent.
Practical Example
Imagine Jean earns 500,000 RWF per month.
Instead of spending everything and hoping to save later, he decides to:
- Save and invest 50,000 RWF (10%)
- Use the remaining 450,000 RWF for expenses
Over time, that monthly investment can be used to build a business, buy productive assets, or invest in financial markets.
Common Challenges
Many people say:
"I will save when I earn more."
However, increasing income does not automatically create wealth. People often increase their spending as their income rises.
The habit of paying yourself first is more important than the amount.
Start small and increase your savings rate as your income grows.
Key Lessons from Rich Dad Poor Dad
- Pay yourself before paying others.
- Buy assets instead of liabilities.
- Make your money work for you.
- Develop financial discipline.
- Focus on long-term wealth rather than short-term consumption.
Conclusion
The principle of paying yourself first is one of the simplest yet most powerful financial habits anyone can adopt. According to Rich Dad Poor Dad, wealth is not determined by how much money you earn, but by how much money you keep, invest, and grow.
Whether you earn a modest salary or a high income, consistently setting aside money for your future can help you achieve financial freedom.
The best time to start paying yourself first was yesterday. The second-best time is today.
