If there’s one thing Australians looking to take control of their money in 2025 need to do, it’s this: pay yourself first.

That is, rather than being paid your salary, living your life and then saving whatever’s left over at the end of the month, set up automatic transfers into accounts that match your goals. It’s simple, yes, but Kim Siauw, a financial adviser at Wealth Architects, recommends it to so many of his clients because “it works”.

Siauw says he often meets clients who are earning good money but making no progress on their financial goals, largely because they don’t have a savings plan or an idea of how they are spending their money.

“For a lot of these people, [a pay yourself first approach] is liberating because they’ve finally got a sense of clarity and control over their spending habits,” he says.

More than that, the process of setting a goal, attaching it to a savings plan and then seeing that pot of money grow is essential for building financial confidence, especially for those who may consider themselves “bad with money”, says Victoria Vivente, a financial coach and author of Know Your Worth.

Goals are king

Paying yourself first is essentially about figuring out how much you need to achieve your goals and then setting up an automatic transfer to save enough to meet those goals.

It can be as simple as having one spending account and one savings account. Once the automatic transfer to the savings account occurs, the money in the spending account is there to use for everyday expenses.

But many people will have several savings accounts, each with their own purpose.

Most banks allow customers to set up multiple accounts, often within an app. Then it’s a matter of naming your accounts—house deposit, overseas holiday, etc—and setting up a regular transfer aligned with your pay cycle. Just check that you’re not charged separate account fees for each.

Vivente uses a mind-map approach. She figures out what’s important to her and then attaches accounts to those priorities. An automatic transfer sends money into each of those pools every pay cycle.

“Enjoying myself with friends and travelling are important to me, so those things have their own bucket or account,” she says. “Then I have a bucket for my essentials, and I also have accounts for lumpier costs like going to the dentist, car rego and things like that.

During her time as a financial coach, Vivente’s worked with many people on high incomes who had never been taught how to manage money and were still living pay cheque to pay cheque. She says the key to the pay-yourself-first strategy is to ensure that you are quarantining money for yourself and your goals.

“People work best when they do it in a style that suits their own brain,” Vivente says. “Some people really like having just a two- or three-account system, whereas some people need to have 25 accounts.”

One of the reasons the strategy is effective is because of psychology. “By having a goal and committing to it, we don’t want to break our own promise [by transferring money back out of the savings],” Australian National University behavioural economist Ralf Steinhauser explains. “This loss aversion type of idea helps us stick to our goal and only spend what we have in our budget.”

This is why it’s important to really think about how you name your savings accounts, Vivente says. “When you have a name behind it, you are making a commitment to what that money is for.”

But this is just one way to do it.

James Millard, a financial adviser at Sufficient Funds and author of Insufficient Funds, has a different approach, which is outlined in the graphic below. The person in this example is assumed to be single or not requiring separate spending accounts from their partner.

The way it works is that your take-home pay is sent to one account for bills and expenses such as groceries, petrol or train fares, childcare and rent. One card is attached to this account.

And immediately after payday, money is transferred out of the bills account (card A) into your lifestyle spending account (card B), which covers things such as dining out, subscriptions, hair and makeup and books, for example.

Money is also transferred into accounts for upcoming expenses, such as travel and gifts, but no card is attached to these.

And the final expense category is “squirrel accounts”. These are the pay-yourself-first accounts. Money allocated to these might be labelled “savings” or “financial freedom fund”, “mortgage”, and perhaps even “baby fund”.

An emergency fund is a must, Millard says, and it might contain between two months of living expenses if you’re single with a secure income, or up to six for somebody who is self-employed and has kids. And while you need to ensure your emergency fund keeps pace with your situation, once you’ve generally hit that sum, you probably don’t need to “squirrel” money away every pay cycle.

Siauw has the reverse approach—salary or income is paid into your savings account, and then set amounts for lifestyle expenses and bills are automatically transferred out.

What’s left in the savings account either stays there, or is divided between things like an offset account, investments, an emergency fund or other savings accounts based on your long-term goals.

“The starting point [with my clients] is, what are your goals and priorities?” says Siauw. “Is it a house? Is it a holiday? Then we try to map out what’s important to them and understand their current spending.”

There are apps that can help with that, but it can also be a matter of sifting through the past six to 12 months of credit and debit card statements.

“Then we say, ‘OK, is there room to improve on your budget? Is there anywhere you’re happy to save in favour of a future goal?’”

Be preprepared to tweak as you go

Either way, Millard says, the process of going through spending, setting goals and setting up the required savings accounts should take no longer than an afternoon.

“The most important thing is that you take this advice, but apply it to your world. Give it a little bit of thought. If this plan doesn’t work for you, look at why. Don’t give up on it. Just see if there’s something missing, and plan ahead.”

Expect to be tweaking the different allocations for up to six months, Siauw adds. “Month to month, things pop up, things change,” he says. “You get lumpier expenses that pop up out of the blue, and to normalise that, I feel like six months is a fair checkpoint to sit back and ask: ‘Is this working?’

“You will find you need to adjust some of those figures you’ve set up. You can’t just set it up and never look at it again.”

In other words, if you find that your weekly automated transfer was a bit too ambitious, and you’re frequently pulling money back out, don’t be disheartened. But do analyse what you need that money out for and decide if you ought to plan for those expenses separately.

Vivente’s rule of thumb is to start by saving less than you think you can, so there’s some wiggle room, and build from there.

If you’re overwhelmed, just start small

While having goals tied to the respective savings accounts makes it much easier to stay the course—and harder to transfer money out—Vivente says that if the idea of figuring out your budget, your goals and setting up multiple accounts feels overwhelming, it’s OK to start with something simpler.

“It may be that you just start and set up the automatic savings account and name it something cool like, ‘Here when you’re ready’, and then you start to build that trust within yourself that you can actually save money,” she says.

It’s possible that from there, you begin to unlock some of the imagination required to set goals that previously seemed too audacious.

Siauw agrees, but adds that while you may not consider yourself goal-oriented, almost anyone who is working would be trying to build towards something.

“If people are a little bit aimless around where they’re headed, that’s fine, but you’re not going to get anywhere without savings and runs on the board. So even if they don’t have their goals clearly mapped out, just starting somewhere is better than nothing.”

And if you can go through the process of figuring out your goals and your savings habits to develop a more sophisticated savings strategy, it’s definitely worth doing.

“[Saving] often gets overlooked, but structure is the lifeblood of every plan. Without an ability to save, nothing works.”