Prioritizing Goals and Expenses

Introduction

There are a lot of things we’d like to do with our money: save for retirement, pay down debt, reduce taxes and build up an emergency fund. But there are only so many dollars in the pot, and unfortunately, not everything can get equal attention. That means we have to prioritize our spending in order to make sure we’re doing what’s most important to us — whether it’s buying a new car or saving for retirement.

Here’s a strategy.

When it comes to money, it's easy to get caught up in the cycle of spending and worry about what you can’t do. But if you want to break free from that mindset and make progress toward your goals, it helps to focus on what you can do. Here’s a strategy for working toward your priorities without sacrificing too much in the process.

• Prioritize your goals: This may seem obvious, but writing down what matters most is an important first step. If there is more than one goal at play here, make sure they’re all written down somewhere so they don’t fall through the cracks (or get forgotten altogether).

• Decide how much money can go toward each goal: Once all of those priorities are out on paper, go through them one by one and figure out how much money could realistically be put toward each—and then prioritize them accordingly! You might find that some things aren't feasible right now because they aren't financially possible yet; once you get more stable footing under yourself (whether that means making more money or saving up enough cash), revisit these goals again so they're still being pursued with intentionality and purposefulness rather than falling victim again as soon as something new comes along (like a shiny new toy).

Your priorities are personal.

There’s no formula for establishing priorities. Everyone faces different challenges and has different goals, whether it’s saving for college for a child or finally taking that family vacation to Hawaii. You have to figure out where your personal goals lie and which ones are most important at this time in your life. If you haven’t done that yet, it may help to ask yourself some of the following questions:

• What are my financial goals?

• How much money do I want to save each month?

• How am I going to reach those savings targets?

Look at your income and expenses.

In order to prioritize your goals, first you need to look at your income and expenses. Then think about the trade-offs that you can make, such as condo vs house, new iPhone vs used phone, or cable TV vs Netflix. And don’t forget to include savings and charitable giving as a priority that helps individuals get ahead over time or change people’s lives through giving.

Look at where you are right now with your spending and figure out if there is room for improvement in some areas. It may seem daunting but it will be worth it in the end!

Decide how much should go toward each item.

The next step is deciding how much money should go toward each item — again, this depends on what your goals are and what your budget is like. If you want to build up an emergency fund because it’s non-existent now, you may need to put more money toward that than saving for retirement at first.

If a goal is giving yourself the freedom to travel or taking a class, then perhaps that’s where all of your savings will go until it’s accomplished. If there are multiple goals that need attention at once (like saving for college and buying a car) then it might be best to set up different accounts so that each account is dedicated just to one goal (or maybe even two).

Figure out how you’re going to allocate funds.

Next, figure out how you’re going to allocate funds from each paycheck toward these items. This requires some flexibility because unexpected expenses come up all the time (e.g., roof repair).

For example, if your goal is to pay off your credit card debt and the amount of your salary that is needed to pay for rent and groceries plus utilities is $1,500 per month, then $500 can be used for other goals. If you have a smaller emergency fund than this amount or if there are other financial goals that take priority over paying down credit cards, consider using more than half of your income toward those obligations instead. For example:

If I want my emergency fund to be able to cover three months of expenses and I make $5k/month after taxes:

• I could put away 10% ($500) into savings each month

• Or I could put away 15% ($750) into savings each month

Conclusion

The key to this strategy is being flexible and able to adapt to the unexpected. You may want a vacation, but if there’s an emergency that requires you to spend more on groceries this week, then do so without any guilt. It’s not just about saving money — it’s also about living life as fully as possible!

Listen to Coach Nino and Sarah discuss this topic on The New Money Habits Podcast HERE