By Dr. Jennifer Hunter
Welcome back to Money Moment episode #7 with your host, Dr. Jennifer Hunter. Today the topic is setting financial priorities.
Most people would agree that financial security is an important goal to achieve, however most people would probably also admit they do not have a clear idea of how to attain financial security. Many people go through their financial lives doing their best to meet daily financial obligations without setting aside time to think about and plan for long term financial goals. In order to make financial security a reality, you need to take the first step of setting financial priorities.
Identify your goals
Simply stated, the first step is to figure out what it is that you want. Setting financial priorities is about using what you have to get what you want. You must first identify goals that are personally relevant or important to you and your family. Do not be afraid to identify goals that will challenge both you and your family.
Encourage your entire family to get involved. Your partner and your children can all be involved in identifying goals that are most important to your family. Additionally, the possibility of achieving these goals is increased when everyone is involved in what the goals are and invested in making them a reality.
Make a list
Write down your financial priorities. These priorities can range from paying off your debts to establishing a college fund for your children. After you have listed your priorities, you want to categorize your financial priorities. It is likely that your list could be quite lengthy. In order to make the list more manageable it is useful to categorize your priorities into short-, medium- and long-term goals.
Short-term goals are those that can be reached within the next 6 months to one year, e.g. saving toward a family vacation. Medium-term goals can typically be accomplished within 1 – 5 years, e.g. saving for a down payment on a car. Long-term goals require more time and likely be achieved in 5 or more years form now. An example of a long-term goal could be funding a child’s education or saving for a down payment on a house.
Rank and research your list
Rank your list in order of priority. This can be difficult because financial priorities often overlap. Ask yourself which goal will cause the greater harm if it is delayed. Remember, putting off a goal for a while does not mean that you are abandoning the goal.
You will most likely need more information in order to figure out how to best meet your goals. For example, if your financial priority is to retire by the age of 62, you may need to do some research to determine how much money you will need to save before retirement in order to live comfortably.
Revisit your list often
Once you have set your financial priorities, your job is not over. It is helpful to keep your list in an easily accessible location and revisit it frequently to ensure that you are staying on track. A critical part to sticking to your financial priorities is making sure that you are controlling your spending and emphasizing saving.
It is best to plan on revisiting your list whenever you are evaluating your budget. Especially when saving for short-term goals, it is useful to put that list on the refrigerator, or the door into your laundry room or garage. Put it in a place where is will serve as a daily reminder of what you are working toward.
Setting financial priorities may seem overwhelming, however by following the steps discussed, you are one step closer to making those priorities a reality. Keep in mind that it is ok to adjust your financial priorities as needed. Financial priorities should be taken seriously but should also adapt to you and your family’s changing needs
Join us for the next Money Moment podcast episode about summer boredom busters on a budget.