Setting Your Financial Priorities
Setting financial priorities is a critical component of your overall financial plan. Fortunately, there are no complicated mathematical calculations involved in determining financial priorities, and deciding what to prioritize is relatively simple.
Start With the Basics
As the economy continues to experience turbulence and unpredictability, it is prudent to first consider the basics — the routine day-to-day expenses that we all have — when setting your financial priorities. Basics are the very essential things you need to survive. They include food, shelter, utilities and clothing. These should always be your top priority no matter what. Your basics should never be compromised.
Decide on Your Goals
Prioritizing your finances demands you have a goal in sight. Write down the various goals you have on a piece of paper. Think about where you want to live, what you want to drive, where you want to travel. Think about the different things you want to buy. Clearly defining and outlining these goals will help you establish what your priorities will be.
Of course, if you are chained to heavy debt, one of your goals should be reducing that debt. Not only will this allow for a less stressful life, but it will also increase your spending power. In the end, being debt free is not only wise for its own sake; it also helps you achieve your other financial goals.
It is important to consider debt a high priority. It’s true that dealing with debt effectively saves you money, but it also does something else that is important: it reverses your relationship with your finances. You want your money to work for you rather than the other way around. This is sound investment strategy and sound financial prioritizing.
Make a List
Creating a tangible list of goals that you want to achieve accomplishes a few things. First and foremost, it provides a focal point. This is critical, particularly during the periods where you will be tempted to give in on your financial goals. Having the ability to see your goals can lower your temporary anxiety and allow you to regroup and reorient your thinking.
Along this line of thought, having your goals in front of you reminds you of your commitment to your finances. Consider your goal a covenant, an unbreakable promise. Seeing your goal in writing helps keep your priorities top of mind.
Manage Your Spending
Your spending habits should always correspond to your financial goals. This is particularly true when it comes to making larger purchases. If your spending does not advance your priorities or goals, then you should not be spending in such a fashion, as it is in direct conflict with what you want to achieve. How you manage your spending will determine the outcome of your priorities. Careful, prudent spending will allow you to leverage your spending power and commit valuable financial resources to furthering your priorities.
Stay Your Course
It is important to more or less maintain your financial priorities as you progress. Of course, they can be somewhat flexible but not to the point of becoming unrecognizable. Stay the course, particularly in challenging times, and then enjoy the rewards that will ultimately come to you once you have fulfilled your goals.