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Put yourself first!

By Charles Hopkins Published 07/6/2007 | Entrepreneur

What bill should be the first bill you pay each month? The "bill" should be the one to yourself. Are you one of those individuals that say you will start saving as soon as the credit cards are paid off or all the debt is gone? Guess what? Studies show that if you wait your likelihood of ever getting started is small. As our income grows we expand our spending until we use up the additional amount received.

So - pay yourself first. The recommendation is that you save 10% of your net pay. If you cannot start that big then try even 2% or 3%. The key is to make it automatic. Have the amount you are saving deducted from your paycheck or from your checking account into a savings account. This is one separate account or maybe several if you are saving for multiple goals. Make it difficult to access this money. Do not have an ATM card for this account. Use a bank that is out of town or across town from where you normally do your banking. Or use an Internet bank such as IngDirect or EmigrantBank.

Accumulate an emergency fund so that you do not have to run to your credit cards every time a crisis arises. Start saving for a special vacation or for retirement. Start saving for your child's education. Be serious about not touching the money unless you really have to or have reached your goal. A sale at your favorite store, a dinner out or a new gadget being introduced are not emergencies.

If you are starting with less than 10% of your net pay then set goals to gradually increase the percentage. Agree to increase the amount once a quarter or once a year until you have reached the 10%. Or really become a saver and reach for 15% or 20% of net income. If you are late in starting retirement savings this level is almost a necessity.

Don't wait. Start now. Just as we increase our spending when we have additional income we decrease our spending when less income becomes available. Just be sure that you are decreasing your spending and not just increasing your debt by trying to maintain the same spending pattern. The key is to make it automatic so you cannot get sidetracked. Are you not more important than the telephone bill or the electric bill? Put yourself first.