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Budgeting is key to financial success, but with so many strategies available, it can feel overwhelming. One of the most powerful and simplest approaches is the pay-yourself-first method. This system turns traditional budgeting upside down by prioritizing saving and financial goals before addressing everyday expenses. Instead of saving what’s left over at the end of the month, you save first — and spend what’s left after.

If you tend to live paycheck to paycheck, adopting a pay-yourself-first mindset could help you break free from that cycle and start getting ahead. Whether you’re working toward building an emergency fund, saving for a house, or investing for retirement, this strategy can help you get there faster. Here’s a closer look at why this method works so well and how to put it into practice.

3 Reasons to Pay Yourself First

Before we get into what it means to pay yourself first, let’s explore why you might want to adopt the so-called “reverse budgeting” method.

1. To Save Consistently

One of the biggest advantages of the pay-yourself-first budget is that it creates a consistent saving habit. Many people intend to save whatever money remains at the end of the month, only to find that there isn’t much — or anything — left.

By paying yourself first, you’re removing the temptation to spend that money. It becomes a non-negotiable — just like your rent or electric bill. You commit to putting aside a set amount each month into a savings account or investment account, treating your future self as a priority. Over time, these small contributions can accumulate into a sizable savings or investment fund, providing financial stability and peace of mind.

2. To Prepare for the Future

Financial emergencies are almost inevitable. Whether it’s a car repair, medical bill, or trip to the vet, unplanned expenses can derail even the most careful budgets. Paying yourself first ensures you’re building a safety net before life throws a curveball.

Beyond emergencies, the pay-yourself-first strategy also helps you prepare for long-term goals. Whether you’re hoping to buy a home, travel, or fund a child’s education, prioritizing savings makes it easier to achieve big-picture plans without relying on debt. And while retirement may seem a long way off, the sooner you start saving, the more time your money has to grow through compound returns (when your returns start earning returns of their own).

3. To Stay Motivated

Budgeting can feel restrictive and discouraging, particularly when the main focus is on cutting expenses and limiting spending. Paying yourself first changes that mindset. Instead of seeing what you’re giving up, you see what you’re gaining — a growing savings account, a bigger retirement fund, and real progress toward your goals.

Each month that you pay yourself first is another step forward. That sense of progress can inspire you to stay on track, stick with your budget, and look for even more ways to improve your financial well-being.

How to Start Paying Yourself First

If the idea of paying yourself first sounds appealing, here’s a simple step-by-step guide to getting started.

1. Assess Your Income and Spending

Before you can determine how much to pay yourself, you’ll need to get a sense of your overall financial picture. You can do this by gathering up the last several months of financial statements and using them to calculate your average monthly income and average monthly spending. Next, you’ll want to categorize your monthly expenses and divide the list into essential spending (like housing, utilities, groceries, debt payments) and nonessential spending (dining out, entertainment, clothing).

Once you have a clear picture of your income and expenses, you can start identifying how much room there is to pay yourself first. Keep in mind that the goal here is to prioritize saving as if it were an essential bill.

2. Determine How Much to Pay Yourself

How much you should siphon into savings each month depends on your income, expenses, and goals. A good starting point is 10% to 20% of your take-home pay, but don’t be discouraged if that feels out of reach at first. Even saving 5% is better than nothing, and you can gradually increase the percentage as your financial situation improves.

To hone in the right amount to pay yourself, you’ll want to consider your short- and long-term financial goals, how soon you want to reach them, and how much you’ll need to save monthly to meet those goals.

If saving for multiple goals feels too overwhelming, it’s okay to prioritize. For example, If you don’t have a solid emergency fund, you might start there. Once that’s in place, you might bump up your 401(k) contributions and/or start saving for another goal like a downpayment on a home or car or your next vacation. The key is to start somewhere and commit to regular contributions.

3. Trim Unnecessary Expenses

If your current spending habits don’t leave much room for saving, you’ll need to find some places to cut back. The easiest way to find extra money is to look closely at your nonessential spending and consider what you can live without.
Some areas where people tend to overspend include:

•   Eating out or ordering takeout frequently

•   Subscriptions and streaming services

•   Unused gym memberships

•   Impulse purchases or retail therapy

•   Expensive cable or phone plans

Redirecting even $50 or $100 per month from nonessential spending into savings can make a big difference over time. Trimming the fat in your spending not only eliminates waste, but also helps you start spending with more intention, rather than making decisions impulsively or passively. Like other budgeting methods, the pay-yourself-first strategy helps ensure that your spending aligns with your values and goals.

4. Review Your Bank Accounts

To successfully pay yourself first, you need the right banking set-up. It’s a good idea to have multiple accounts to separate your savings from your everyday spending. This prevents the temptation to dip into savings for nonessential expenses.

At a minimum, you’ll want to have one checking account that doesn’t charge any monthly fees (bonus if it also earns some interest), along with at least one savings account that pays a competitive annual percentage yield (APY). To help grow your savings faster, you may want to open a high-yield savings account. These accounts offer significantly higher APYs compared to traditional savings accounts. You can often find the best rates at credit unions and online banks.

5. Automate Your Savings

Once you’ve decided how much to pay yourself each month and where to put those payments, automating your finances is key. By setting up automatic transfers from your checking account to your savings accounts, you eliminate the need to make a decision each month. It happens behind the scenes — just like a bill payment.

Consider setting your transfer to occur on the same day you receive your paycheck. This ensures the money is moved before you have a chance to spend it elsewhere. Alternatively, you might see if your employer will do a split direct deposit, where most of your paycheck goes into checking and a certain percentage goes directly into savings.

6. Review and Adjust Based on Your Goals

Life is constantly changing, and your personal budget should reflect that. It’s a good idea to periodically review your financial goals, income, and spending habits to make sure your savings strategy still aligns with your priorities. You might set a reminder in your calendar to review your budget every three to six months. You’ll also want to go over your budget whenever you experience a major life change (like a new job, move, or marriage).

Some questions to consider when doing a budget review:

•   Am I meeting my savings goals?

•   Can I afford to increase how much I pay myself?

•   Are there any expenses I can reduce or eliminate?

•   Have my financial goals changed?

Adjustments are normal and necessary. The key is to remain proactive and intentional with your money. As your income increases and/or debt decreases, look for opportunities to boost your savings rate and pay yourself even more.

The Takeaway

The pay-yourself-first strategy isn’t simply a budgeting method — it’s a shift in mindset that puts your financial well-being front and center. By prioritizing savings before spending, you can build a habit of consistency, prepare for the future, and stay motivated as you work toward your goals.

This approach to budgeting is also easy to implement. To get started, you simply need to assess your income and expenses, decide how much to pay yourself based on your financial goals, cut unnecessary expenses to free up savings, and automate your savings to stay consistent.

Remember that it’s fine to start small. The key is that you start — and stick with it. Over time, you’ll likely gain momentum and confidence, and those early efforts will pay off in the form of more financial flexibility and greater peace of mind.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

Are there any disadvantages to paying yourself first?

While paying yourself first is a powerful savings strategy, it can present challenges if your income is irregular or your monthly expenses are high. Automatically transferring money into savings before covering essentials could cause cash flow issues, especially during emergencies or months with unexpected costs. Prioritizing savings without a flexible plan could also lead to relying on credit cards or loans to make ends meet. It’s important to balance saving with realistic budgeting to avoid financial strain.

What types of accounts are best for paying yourself first?

High-yield savings accounts, retirement accounts, and investment accounts are ideal for paying yourself first. High-yield savings accounts offer easy access and better interest rates than traditional accounts, making them ideal for short-term goals. Retirement accounts often provide tax advantages for long-term saving. For building wealth, automated investments in diversified portfolios can be beneficial. You’ll want to choose your accounts based on your goals, time horizon, and tolerance for risk.

How does paying yourself first help with financial stability?

Paying yourself first builds financial stability by prioritizing savings before spending. This habit ensures you’re consistently setting aside money for emergencies, future goals, and retirement, rather than relying on leftover funds. Over time, it can help you create a financial cushion that reduces stress, prepares you for unexpected expenses, and lessens the need for high-interest debt. This proactive approach also helps you build long-term financial security.

Can I still pay myself first if I have debt?

Yes, you can — and often should — pay yourself first even if you have debt. Building savings, even a small emergency fund, can prevent further debt when unexpected expenses arise. It’s about balance: You might prioritize high-interest debt repayment while also saving a small portion of your income. Over time, having savings can improve your financial flexibility, reduces reliance on credit, and can help you make faster progress toward becoming debt-free.

What are the biggest challenges of paying yourself first?

One of the biggest challenges of paying yourself first is sticking to the habit, especially when money feels tight or unexpected expenses arise. It can be tempting to skip saving in favor of immediate needs or wants. People with irregular incomes may also find it challenging to divert a set amount of money to savings each month. To overcome these hurdles, it’s a good idea to start small, automate your savings, and track your progress to stay committed and motivated.

About the author

Jacqueline DeMarco

Jacqueline DeMarco is a freelance writer who specializes in financial topics. Her first job out of college was in the financial industry, and it was there she gained a passion for helping others understand tricky financial topics. Read full bio.

SOBNK-Q225-111

For many homebuyers, especially those purchasing for the first time, the prospect of coughing up a five-digit down payment is the most intimidating part of the process. But the good news is, these days, it’s possible to put down far less than 20%. Depending on the loan type you qualify for, you may be able to put down as little as 3%, which translates to $6,000 for a $200,000 house.

Here’s what you need to know about the income requirements, down payment options, and other important pieces of the financial puzzle if you’re considering purchasing a home for $200,000 or so.

How Much Income Do I Need to Afford a $200K Home?

Among other factors, like your credit score and your available down payment, mortgage lenders do consider your income when determining what you can qualify for as a first-time buyer. But instead of enforcing one specific cut-off point for household income, most lenders use a more complicated algorithm to decide whether or not a would-be borrower can qualify.

There is, however, a quick rule of thumb that can help first-time homebuyers figure out an approximate income ballpark that will ensure you can make your mortgage payments. A long-standing financial guideline suggests you should spend no more than 30% of your gross income on your housing payment each month. Although rising costs mean this metric is harder to meet in some American cities and states than others, it’s still a good place to start.

So, consider your $200,000 potential home purchase. It’s not exactly a jumbo loan, but it still comes with costs. Using a mortgage calculator, you can get a rough idea of how much your monthly mortgage payment might be, depending on your interest rate and available down payment.

For a $200,000 home with a 3% down payment ($6,000), with an interest rate of 7%, a 30-year fixed-rate mortgage would come with a payment of about $1,300. But you’ll also need to factor homeowners insurance, property taxes, and — because you put down less than 20% as a down payment — private mortgage insurance. This means your housing costs would be in the neighborhood of $1,600 per month. In order to meet the 30% guideline, that would mean you’d need to earn about $4,800 per month, or $57,600 per year, to comfortably meet your housing payment responsibilities.

However, your lender may require a higher level of income to qualify you for the loan, depending on your other qualifying factors.

How Much is the Down Payment for a $200K House?

If you choose to put down the 20% that will keep you from having to pay private mortgage insurance, the down payment for a $200,000 house will come out to $40,000.

However, conventional loans allow well-qualified borrowers to put down as little as 3%, which is only $6,000 on a $200,000 home. You could also choose to put down an intermediary amount, such as 5% ($10,000) or 10% ($20,000).

What Are the Down Payment Options for a Home Worth $200K?

The specific down payment options that are available to you will depend on your lender, your qualifying factors (such as credit history and income), and what type of mortgage loan you opt for.

For instance, conventional loans allow well-qualified first-time homebuyers to put down just 3%, while down payments for FHA loans, backed by the Federal Housing Administration, bottom out at 3.5% for borrowers with a credit score of at least 580 (or 10% for those whose scores are as low as 500). If you obtain a VA loan (backed by the U.S. Department of Veterans Affairs), you might be able to put down nothing at all.

What Does the Monthly Mortgage Payment Look Like for a $200K Home?

As you’re thinking about how much is the down payment for a $200K house, you’ll also need to consider how the mortgage payments will fit into your budget. As noted, the best way to understand what you stand to pay monthly on a home loan is to use a mortgage calculator. The payment calculated above — $1,300 — assumes a low down payment (3%) and an interest rate of 7% before taxes, insurance, and private mortgage insurance. If, however, you put down a higher amount up front — say, 10% or $10,000 — and had an interest rate of 5%, your loan payment would go down to around $1,000 per month (again, before property insurance, homeowners insurance, and mortgage insurance).

What to Do Before You Apply for a $200K Mortgage

If you’re considering applying for a $200,000 mortgage — or any mortgage, for that matter — it’s a good idea to pull your credit history and ensure that everything on your report is accurate to your knowledge. If you have high revolving debt balances or a relatively low credit score, it may also be worthwhile to work on improving your credit score before you apply so as to attain the lowest available interest rates.

At the big-picture level, deciding where you want to buy a house is perhaps the most important step toward ensuring you’re happy in your new home. Choosing the right locale can really help lower your cost of living. While everyone knows housing prices in big cities have skyrocketed over the last decade or so, there are affordable places to live in the U.S. if you know where to look. Moving to a new city or state is a big project, but doing so can lower the average monthly expense per person by hundreds of dollars.

Finally, if the down payment is the biggest hurdle between you and your homeownership dream, be sure to check out down payment assistance programs that may help bridge the gap. Grants may be available at the state, federal, and local government levels, as well as low-interest loans.

Should I Get Preapproved Before Applying for a Mortgage?

The mortgage preapproval process helps you understand how much house you’re able to afford given your current financial situation — and also shows sellers that you’re motivated and serious. In general, getting preapproved before seriously hitting the housing market is a good idea, but keep in mind that your preapproval does have an expiration date — normally between 60 and 90 days after you go through the process.

How to Get a $200K Mortgage

From banks to credit unions to digital-first financial institutions, there are many places to get a $200,000 mortgage, whether you’re buying your first home or hoping to get better terms and save money as part of a mortgage refinance. These days, much of the application process can be done entirely online. You can prequalify and get a general sense of your borrowing power by answering a few simple questions. Seeking a lender’s preapproval requires submitting more information and financial documentation.

The Takeaway

The down payment for a $200,000 house can be as low as 3% ($6,000) or as high as 20% ($40,000) or even higher, depending on your financial situation and goals. Many homebuyers, especially first-timers, put down less than 20% on the road to their dream home.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

How much should I make to afford a $200,000 house?

Using the 30% rule of thumb (your housing costs should not exceed 30% of your gross income) and assuming a housing payment of about $1,600 per month (including property taxes, private mortgage insurance, and homeowners insurance), you should make about $4,800 per month, or $57,600 per year, to comfortably afford a $200,000 house. However, your mortgage lender may have different income requirements depending on your other qualifying factors.

What credit score is needed to buy a $200,000 house?

While there’s no specific credit score floor for purchasing a home of any price, the higher your score, the better your loan terms stand to be — including your interest rate. With an FHA loan, which is designed specifically for first-time buyers who may be facing financial hurdles on their journey to homeownership, you may qualify with a score as low as 500 if you can come up with a 10% down payment. Many lenders who offer conventional loans require a minimum credit score of 620.

How much is a $200K mortgage per month?

Your monthly mortgage payment depends on many factors, including your interest rate and loan term (how long you have to pay it off). For a 30-year fixed-interest loan at a rate of 7%, with a down payment of 3%, your monthly mortgage payment on a $200,000 home would be about $1,300 before other expenses such as property taxes, insurance, and private mortgage insurance.

photo credit: iStock/Milan Markovic

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SOHL-Q225-141

Finishing a master’s degree is a big deal and deserves a huge congratulations. Countless hours spent tackling reading lists, group projects, and thesis research have finally come to an end. And after all that, you’re probably wondering what comes next after getting your master’s degree.

On one hand, an end to tuition payments and assignments is a relief. On the other hand, figuring out what to do after grad school can be daunting. Compared to navigating life after college, master’s students may be faced with more debt and responsibilities than when they finished their undergraduate degree.

Whether starting a new and exciting role, embarking on the job hunt, or making plans for an alternative path, the transition may take time adjusting to.

To help you make the next step, check out these tips for what to do after grad school.

Utilize University Career Resources and Networking

Many graduate programs promote their job placement rates to attract future students and stay competitive in college rankings.

To help ensure master’s students have a plan for navigating life after college, many universities offer career resources and services. Possible programs include career planning, interview and resume workshops, job fairs, and networking events with employers and alumni.

If you find your university’s career services to be limited or you’ve already graduated, you can reach out to your former professors for advice on entering the job market or pursuing a PhD.

Some universities may have official alumni groups or organizations to tap into. Connecting with alumni, professors, and classmates on LinkedIn is another way to broaden your network and find jobs in your desired field.

Entering the Workforce

A master’s degree can be an asset in the job market and for long-term career growth. In 2024, employed individuals with a master’s degree earned median weekly earnings of $1,840, compared to median weekly earnings of $1,543 for those with bachelor’s degrees, according to the Bureau of Labor Statistics.

Still, landing a job that reflects your credentials immediately after graduate school can be difficult. Sometimes, factors like geographic location or an economic recession could pose challenges to gainful employment.

If you have limited work experience or changed careers after graduate school, it may be helpful to cast a wider net with job applications in your desired sector.

Not everyone’s career is a straightforward path. Finding a position that balances passion and professional development can be a good place to start.

Recommended: How to Financially Manage a Job Transition

Continuing Education

Depending on your career goals, a doctorate degree (Ph.D.) could be a way to develop specialized knowledge and stand out from the pack. As of 2023, the number of Americans whose highest degree was a master’s degree reached 25.5 million, compared to just 8.5 million for a Ph.D., according to the Education Data Initiative.

Besides working as a college professor, a PhD can be applicable for a variety of careers, such as researcher, scientist, psychologist, and high-level positions in government agencies.

Whereas completing a master’s degree generally takes one to three years, a PhD program can take between five and six years, possibly longer.

Given this considerable time commitment, it is worth considering the return on education for different doctoral programs. Even if you receive tuition reimbursement and stipend for a Ph.D., you may want to calculate the ratio of foregone earnings from studying to the income a doctorate will help you receive upon graduation.

Recommended: The Highest Paying Jobs in Every State

Teach College Courses

After earning a master’s degree, there may be opportunities to stay involved in academia without pursuing a doctoral degree. Some graduates utilize their master’s credentials to teach college courses as a full-time or adjunct lecturer.

Many community colleges only require their instructors to have a master’s degree. Usually, these positions are geared towards instruction more than research and writing. Thus, preference may be given to candidates with previous college teaching experience and to those with master’s degrees.

Pay for lecturer positions varies between community colleges, four-year institutions, and graduate schools. The average salary of an adjunct professor, though, is currently $78,476 per year.

You may choose to teach college courses full-time at your local community college or university or teach classes part-time as your schedule allows. Either way, teaching college courses can be a fantastic way to utilize your master’s degree.

National Service

Are you interested in applying knowledge and skills from your master’s degree to make a difference? National service programs, such as the Peace Corps and Americorps, let you do just that.

Peace Corps operates in over 60 countries, with volunteers working on programs related to agriculture, environment, health, community and economic development, education, and youth development.

The bulk of Peace Corps assignments are for two-year durations, preceded by two or three months of language and cultural training. However, candidates with more experience and advanced degrees can apply to Peace Corps Response to serve in more specialized roles for 3-12 months.

Although the organization refers to participants as volunteers, it does provide financial compensation and other benefits. Volunteers receive a living allowance structured according to the host country’s cost of living. Other benefits include healthcare, federal student loan assistance, and vacation time.

Taking Time to Travel

For many recent or soon-to-be master’s graduates, long-term recreational travel may not seem financially feasible for life after grad school. However, the transition from graduation to the workforce can be a good time to travel frugally before professional obligations and life’s responsibilities begin adding up.

To make the most of your travel budget, you can take advantage of free accommodation via couch surfing or work remotely part-time while you’re traveling to bring in some extra funds.

Recommended: How to Save for a Vacation: Creating a Travel Fund

Budgeting for Life After Grad School

Graduate students are no strangers to living on a shoestring budget. During the transition from student discounts and bargain hunting to full-time jobs and steady income, it can be easy to lose track of these money-conscious habits. Creating a budget can help keep you on track to save for things like retirement, a mortgage, and paying off student loans.

One way to possibly save money each month is to refinance your student loans into one new loan with one monthly payment. If you have a strong credit profile and are bringing in a decent income each month, you may qualify for the lowest rates. A lower rate will lower your monthly payment if you keep the term the same. If you want to pay off your loan quicker, though, you can shorten your loan term and reduce the amount you pay in interest overall. Note: You may pay more interest over the life of the loan if you refinance with an extended term.

It’s important to note that if you plan on using federal benefits, such as student loan forgiveness or income-driven repayment plans, you will lose access to these if you refinance. Make sure you won’t need to take advantage of federal benefits now or at any point in the future before deciding to refinance federal student loans.

The Takeaway

Your post-master’s degree path will vary depending on your career goals, industry, and personal interests. Options may include entering the workforce, continuing your education, teaching college courses, or taking time to travel. Whatever option you decide to pursue, you’ll need to do so with a budget in mind in order to make the most of your financial future.

If you are paying off student loans from your undergraduate and graduate degrees, you have options. Refinancing your student loans could give you more favorable loan terms with lower interest rates and flexible repayment plans.
As stated above, however, graduates refinancing federal student loans with a private lender will lose out on benefits like income-driven repayment and loan forgiveness.

If you’re interested in refinancing, consider SoFi. SoFi makes it easy to get pre-qualified online for student loan refinancing in minutes.

FAQ

What comes after a master’s degree?

There are a number of things you may decide you do after getting a master’s degree, depending on your career goals, financial situation, and personal interests. For example, you might decide to enter the workforce to take advantage of your higher earning potential (individuals with a masters earn approximately $300 more weekly on average than those with a bachelor’s degree), continue your education to pursue a Ph.D., teach at a local college, work in national service for an organization like the Peace Corps, or travel.

How many years is a Ph.D. after a master’s?

It typically takes four to seven years to earn a Ph.D. after getting a master’s degree. Many Ph.D. programs are designed to be finished in four to five years, but it usually takes additional time to research and write a dissertation, which is required. In addition, some doctoral students may also be working while earning their Ph.D., so it can take them longer to finish their program.

What is the highest-paying job with a master’s degree?

The highest-paying job for those with a master’s degree is computer engineering, which has an average starting salary of $86,804, according to the National Association of Colleges and Employers (NACE). The next highest paying jobs are computer science, with a starting salary of $86,359; marketing at $85,919; and information sciences and systems at $84,316.

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Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.