Looking at your finances and figuring out how to manage multiple financial priorities can feel like you’re running in circles. How can you pay off debt and save for retirement? How can you pay for your child’s education and invest in your own future?
It’s tough to manage all your short, medium, and long-term financial goals at once. On one hand, focusing on one thing can lead to burnout and also leave you financially vulnerable. On the other hand, spreading your finances too thin to focus on all your goals isn’t very effective either.
If you’re trying to find balance in your financial life, here are some tips to manage multiple financial priorities without letting your big goals suffer.
Make a List
The first step to managing all your goals, is to make a list. You can choose to write it down with pen and paper, or in a Word document. Regardless of your method, it’s important that you write your financial priorities down, and keep them somewhere easily accessible.
List them in order of importance and be as specific as possible, using actual numbers and descriptions. Some standard financial priorities may include:
- Pay off all consumer debt
- Have $10,000 in an emergency fund
- Pay off remainder of the car loan
- Reach one year’s worth of salary in retirement
- Invest $5,000 in the stock market
- Open 529 savings plan with $1,000
We all have different financial priorities depending on our income, family situation, and life goals. The point of making a list is to be honest with yourself about what your financial priorities are — it’s okay if they aren’t the same as most other people’s. It has to work for you and your budget!
Set a Timeline
After making a list outlining your goals, now it’s time to create a timeline. You can use a piece of paper to map it out or use goal trackers with your financial software, such as with Mint.com.
Think about end dates for each of your financial priorities. Some of them may be far into the future, and it may seem silly to be tracking something that’s so far away. However, it’s helpful to have it all written down, so you can see the big picture. Put an actual date next to each goal.
For example: Pay off Credit Card #1 — January 1, 2016
By doing this, you’re setting the intention for your goals and giving yourself a clear plan of action.
Create a Budget
After creating a timeline, take a look at your budget. Look at what’s coming in and out each month. If you don’t have a budget, look at your regular expenses (such as housing, food, transportation), and track your expenses to evaluate “wants” spending (anything like concerts, going out to eat, etc.). This exercise will give you some insight into your spending habits, which can help you create a budget.
Calculate how much money you can allot to your financial goals. Then look at your timeline, and determine how many months until your desired completion date. Then figure out how much money you need each month to put to each financial priority, to reach your goal.
After evaluating your budget, check to see if you have any major budget leaks. What surprised you? Are you spending on your values? Is your budget in alignment with your timeline? If not, then see where you can cut back in your budget, and what sacrifices need to be made.
For example; I have lived mostly on a bare bones budget to help me get out of student loan debt as soon as possible. My intensity has shifted back and forth from time to time, but overall, I live a minimal life in order to reach my financial priority of being debt free.
While it may not sound like fun to employ a bare bones budget, remember this is temporary. Once you reach your first financial priority, like getting out of debt, you can move on to the next and allot those funds to your next goal.
Automate Your Finances
One of the best ways to manage your financial priorities is by automating the process. I have been able to build my emergency fund, and save for my other financial priorities by automating my savings and adopting a ‘set it and forget it’ attitude. I was able to save $14,000 before going to graduate school, by automatically saving $600 per month, on a fairly minimal salary — while still paying off debt.
Most banks allow you to set up automatic transfers between your checking and savings. Go to your settings, choose a date for a transfer, and set an amount and a schedule (weekly, monthly, etc.).
Automation is powerful because it creates an ingrained habit — and the best part is you don’t even notice it! Aside from automating your savings to ensure that you are consistent (it’s far too easy to make excuses on why we can’t save), you can also take advantage of targeted savings accounts. I personally use Capital One 360, which allows me to set up multiple savings accounts, all of which are allocated towards specific goals. I have savings accounts for an emergency fund, taxes, and a travel fund.
I find the simple act of being able to name my savings accounts very powerful. It helps give it a purpose, and because the money is separate from the other accounts, I am never confused about what my money should be used for.
The problem with having one lump savings account is that it is easy to forget its purpose and justify using it for other expenses that come up.
Managing Multiple Financial Priorities
Remember, half the battle of managing multiple financial priorities is getting started. It’s easy to get overwhelmed and only focus on one area of your finances while neglecting the other ones. But for your financial security, it’s important you’re balanced in all areas of your financial life.
It’s also important to understand that these priorities are flexible! Life changes, work changes, even relationships change — so don’t feel burdened by your list or budget, but let it be a guide, and re-evaluate it as necessary.
Your financial priorities don’t need to be fixed, they need to be flexible — just like your life!
How do you manage multiple financial priorities? What tips can you share for reaching long-term and short-term financial goals?
Originally posted at https://moneyning.com/money-management/how-to-successfully-manage-multiple-financial-priorities/