What does it mean to "pay yourself" in financial terms?

To "pay yourself" in financial terms refers to the practice of prioritizing savings by allocating a portion of your income to savings or investments before paying for other expenses. This approach emphasizes the importance of treating savings as a non-negotiable expense. By doing so, individuals ensure they are building their financial future, preparing for emergencies, and accumulating wealth over time.

This concept is fundamental in personal finance because it encourages discipline and a proactive attitude toward securing one’s financial well-being. It aligns with the principle of "paying yourself first," where the act of saving is viewed as a way to invest in one’s future needs and goals, rather than merely focusing on immediate consumption or expenses.

While investing in stocks can be a means of saving and growing wealth, it is not the initial step implied by "paying yourself." Additionally, purchasing something you want focuses more on consumption than on savings, and reducing unnecessary spending is about cutting costs rather than the proactive measure of saving first. Therefore, setting aside savings before other expenses is the most accurate interpretation of "paying yourself."