Agreed! You have plans, stuff to do, milestones to meet. You open your wallet and your bank balance, doubt begins to settle in. “Am I sure I will be able to hack this? Looks like a mountain that I may not be able to scale”, you wonder aloud. Well, fear not! We got you! This is how you set your priorities straight. When you finally realize that you have finite resources to achieve your financial goals then planning becomes inevitable.
First things first! What do you want to achieve?
As with any goal, your financial priorities should be aligned to your long-term plans, this includes putting your children through to school, maintaining a particular lifestyle after retirement and paying off and staying out of debt.
Typically, your financial goals will fall in three categories i.e., to save, to invest and to spend. Usually, the stage you are in life determines the category you will emphasize on.
Let us start with the basics; an emergency fund. The gold standard of emergency funds is to have at least 6 months of living expenses set aside in case of injury or a lay off in employment.
Setting up an emergency fund immediately may be an uphill task for most but easily doable if you set up a fund where you contribute often, say monthly. “Where do you save these funds?” you ask. The best place is not under a mattress or in your sock closet. An interest earning account that is easily accessible in the event of an emergency is recommended. There are many financial institutions offering such accounts. It will benefit you to spend some time understanding them before settling down and putting your hard-earned money in them.
Whatever your goals are, prioritize them based on how important they are to you. Remember that ranking your goals doesn’t mean you won’t reach the ones on the bottom. For example, you shouldn’t be afraid to pay down debt and invest at the same time. Approach prioritizing your finances like planning a trip. You are starting a journey and you have a destination to arrive at.
It may be helpful to come up with a budget. Some people argue that no one became rich by working with budgets as budgets focus on debts and expenses. We say, that budgets are useful in defining the amount of income and fixed expenses in your household and determining your limits. From here, you will be able to confidently live within your means and spend less than you make consequently eliminating debt. Bottom line; don’t try to maintain a lifestyle you cannot afford.
Finally, you will be able to take steps to seal loopholes where your money was spent carelessly and focus more on priority items. Also, you will also be able to take initiative to look for additional sources of income to overcome challenges where money becomes insufficient to settle your priority expenses.
~Good things happen when you get your priorities straight – Scott Caan~
We tackle expecting the unexpected next time…watch this space!
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MSA Financial Expert and Trainer