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Paying Off Debt? Who to Pay First!

July 05, 2012 | Comments: 0 | Views: 188

The largest debt you have IS TO YOURSELF!

No, it's not an error, almost everyone is in debt to themselves and it doesn't mean student debt or mortgages or credit cards. A key Financial Prosperity Principle is to "Pay Yourself a Portion of your Income Before any Other Expenses."

How much? Commonly a figure of 10-20% is needed off the top of your monthly gross income, regardless of the amount. This payment to yourself MUST be treated as the most important bill you pay every month. And it is! Otherwise, you will end up paying everyone but yourself and will have no money set aside for the future.

Now, why are you in debt to yourself? Well, you have owed yourself at least 10% of your gross earned income since you started working! Yes, since way back when. Every year that you did not save that 10% of your gross income is a bill that has accumulated and is now "Past Due".

There is a way to calculate this bill: First determine what your total income has been over your working lifetime, add up all up, year by year and get a grand total. Next, multiply that by.10. If the amount of money you currently have saved plus interest exceeds the calculated amount then you are one of the lucky ones and not in debt to yourself. Well done!

If you're like most everyone else, you have earned quite a bit of money over the years but don't really have much accumulated to show for it. For example, if you averaged $50,000 per year over the last 20 years, then that is $1 million. If we take that cool mil and multiply by 10%, we should have saved $100,000 plus interest (probably an account balance of around $200,000 or more).

If you are short of this figure in savings or retirement investments today, then the difference between what you have and what you should have is your debt amount. This is a debt to yourself. This is actually more important than your mortgage, credit cards, student loans or any other debt. Add this to your list of debts and pay it off too.

Where will you come up with the money to pay this debt? It will certainly help if you make more money and come to terms with some of the luxuries you can really do without.

It takes a commitment to plan for one's future when the present seems a bit overwhelming to make ends meet.

If saving 10% of your income seems a bit too much, never fear. Starting with ANY amount is better than nothing. Any contribution you make to your savings will take you just that much closer to financial success.

For more information on Financial Prosperity Principles and applying the Natural Laws of Personal Finance from The Financial Prosperity Coach visit

Source: EzineArticles
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