Pay Yourself First

November 7, 2017 at 3:31 pm

If you’ve ever spent time learning about saving for retirement, you may have come across a concept named “Pay Yourself First”.

Pay Yourself First is a reaction to a common financial problem; people base their spending on the amount of money that they have coming in each month, and therefore don’t save money for the future – to deal with emergencies that might come up, or to invest for retirement.

If you pay yourself first – remove the money you want to save from your world before you start looking at how much you can spend – you can establish a savings/investment habit.  It will cost you a little on an ongoing basis, but it won’t be long before your investments start spinning off free cash that can either be re-invested or used for other purposes. The $1000 that you saved will – over the long term – make you much more than that.

Why am I writing about investing?

Well, I’ve realized that this is exactly the same situation that many software teams get in.

Each month, they look at their income (developer time), and then they look at their expenses (bugs to fix, system maintenance, features they want to build), and allocate their income.

That’s the software equivalent of living paycheck-to-paycheck. And it pretty much ensures that you are going to be stuck with your current level of bugs, your current level of maintenance, and your current feature speed – at best. Realistically, these things are likely to degrade a bit as time passes.

If instead, you “pay yourself first”, your investment can help you reduce the amount of time you spend fixing bugs and make you faster at creating features. Do this on a consistent basis, and your investments will start spinning off free time that you can then reinvest to further improve your speed, or deployed to create more features than you could have before.

It’s not easy to set aside even $50 a week when you are starting, nor is it easy to set aside a developer-day on an ongoing basis. But once you’ve started doing this consistently, the returns will make it worthwhile.

What about your team? Are you paying yourself first?