Are You Losing Sleep Wondering How to Pay Yourself First?

You’ve heard it for years—over and over again: "Pay yourself first." Every financial guru says it like it’s the easiest thing in the world. But as a small business owner or entrepreneur, you have no idea how to actually do that.

You’re not alone. Many small business owners struggle with this same question. That’s because when financial experts talk about paying yourself first, they’re usually speaking to W-2 employees—people with a steady paycheck, a 401(k) or 403(b), and possibly even an employer match.

For them, "pay yourself first" simply means allocating a portion of their paycheck to a retirement account before paying bills or spending on anything else. But that’s not how things work when you own a business.

Why "Pay Yourself First" Doesn't Work for Small Business Owners

If you own a shoe store, a hair salon, a bakery, or any other small business, you might use a payroll company to pay your employees. But it’s unlikely you offer benefits like a 401(k)—and if you wanted to set one up for yourself, IRS rules require you to offer it to your employees too.

That can get expensive. And unless you have a huge profit left over at the end of the year and are actively looking for ways to lower your taxes, you’re probably not paying yourself first—and neither are your employees.

This is why so many small business owners keep their heads down, focus on survival, and push retirement planning to the back burner. You might even feel like you’re doing something wrong, but it’s not your fault.

The truth is, financial gurus aren’t talking to you. They’re speaking to people with traditional jobs and predictable paychecks. Small business owners need a different plan.

Entrepreneurs Get Paid Last—But That Has to Change

As a small business owner, you’re often paid last—and your future, retired self isn’t getting paid at all. But this has to change. That’s why I’m writing this blog series—to start a real conversation about retirement planning for business owners who are just trying to stay afloat.

Maybe you run a lifestyle business—meaning it provides you with an income, but you’re not scaling it for a big exit. Maybe you’re a solo entrepreneur, consultant, or freelancer, and you worry about whether you’ll ever be able to retire.

Most small business owners don’t start with a plan to scale and sell their business. Many start by accident or out of necessity. They don’t always have a mentor or a clear retirement strategy.

For example, imagine you’re a talented baker.

• Your cakes are amazing, and your friends and family encourage you to start a bakery.
• You begin selling cakes from home, business picks up, and one day—you have a storefront.
• You never had a formal business plan. You figured it out as you went, using trial and error.
• And trial and error is expensive.
  
  

You’re making money, but not enough to grow, so you stay stuck in survival mode.

At this point, you’re looking at your employees and thinking:

• "I can’t even offer them benefits—how am I supposed to pay myself first?"

This is the reality for so many small business owners. But if you ever want to become a Financially Independent Retired Entrepreneur, you have to find a way to change the pattern.

Two Ways to Start Saving for Retirement Today

Retirement planning for small business owners isn’t as simple as setting up a SEP IRA—not when you’re struggling to keep the lights on. You need a creative approach. Here are two things you can do right now to start building a retirement fund:

1. Create an Additional Income Stream Solely for Retirement

If your business barely covers expenses, you need to create a separate income stream that goes directly into retirement savings.

🔹 How?

• Offer a high-margin product or service that you sell only to fund retirement.
• Example: A baker might teach an online cake decorating class, and every dollar earned goes into a retirement account.
• A hair salon owner could sell a digital haircare guide or exclusive product line, using the profits strictly for retirement savings.
• A consultant might take on one extra client per quarter and automate those payments into a retirement fund.

This method ensures that retirement savings don’t compete with business expenses—it’s completely separate.

2. Use the "Owner’s Retirement Tax" Method

Instead of waiting for the "perfect time" to start saving, treat retirement like a non-negotiable tax.

🔹 How?

• Decide on a small percentage—even just 1-5% of all revenue.
• Every time your business earns money, move that percentage into a separate account (a high-yield savings account, SEP IRA, or brokerage account).
• Example: If your bakery earns $5,000 this month, you transfer $250 into retirement savings.
• Automate the process so you don’t even have to think about it.

This way, you’re building the habit of saving—even if the amount seems small at first.

Start Now—Your Future Self Will Thank You

Saving for retirement as a small business owner isn’t easy—but it’s possible. The key is to think beyond traditional retirement plans and find a creative, realistic way to set aside money now.

If you have questions or need more ideas, join the ThriveWell Collective community for free. Drop your questions in the group, and we’ll discuss them in our weekly forum.

Your retirement won’t happen by accident—so start planning today.