Managing Multiple Financial Priorities - Part 1

For most of us when we think about managing our finances, the term “juggling” probably comes to mind. This is because it is common to have more than one financial priority occurring simultaneously. Are you saving for retirement and trying to pay down your debt? Perhaps you are squirreling away money for an educational goal while trying to start an emergency fund. Maybe you have a family with two small children living in a starter home and you are putting aside money for future college needs. Or you may be continuing to save for retirement while also assisting financially with the care of older relatives. The scenarios are endless and having a plan in place to handle them can make the difference between being prepared or unequipped to deal with your financial situation.

How can you possibly save for multiple goals at once?  

In part one of our three-part series on managing multiple financial responsibilities, we focus on how to prioritize your competing financial goals. Prioritizing where you spend your money is one of the most important financial planning decisions you can make. So, let’s get started. First, think about your personal situation and the full array of your financial goals. Next, create a list of all your competing financial priorities and include an approximate amount of how much you will need for each of these goals. Be honest! Seeing a list of your actual priorities and the money that is needed to meet those goals will help you categorize them.

It’s common to save for multiple goals at once but rare to have enough money to cover everything you might want to achieve. Remember your life and unique priorities determine the course of action that’s right for you.

As you review your list, we suggest you break it down further and visualize your spending in three categories: required, lifestyle and aspirational. 

• Required: These are expenses you are committed to and that you must pay for. They include rent/mortgage, insurance, food, transportation, current loans, utilities.
• Lifestyle: These are discretionary expenses that you choose to spend money on now. They include eating out, entertainment, digital subscriptions, travel, hobbies.
• Aspirational (Goals): These are things you would like to have but need to save in order to achieve them.  They can include retirement, buying a home, education, paying off debt ahead of schedule, major trips, new car.

The “required” expenses must be paid, while the lifestyle or “discretionary” expenses, as the name itself suggests, are optional. Since “aspirational” are long-term goals, they require an extended financial commitment to achieve. 

Once you have each item categorized, try to numerically order them based on your priorities.  For instance, taking care of your expenses like paying off debt or student loans can take precedence over other goals that can be delayed like saving for a vacation.

We understand that prioritizing your goals can come at a cost. 

Here are several potential drawbacks:

• Trying to incur too many expenses at once can result in stretching yourself too thin and winding up in debt.
• If you focus too intently on goals like trips, dining out or shopping sprees, to the detriment of emergency savings and retirement funds, you may go for years living in relative comfort, only to find yourself behind the eight ball at an older age.
• By not spending any of your money on some of your wants, you run the risk of feeling resentful about not enjoying some of the money you’ve worked so hard to earn and save. The key is creating a realistic balance between needs and wants.

In part two of our series on managing multiple financial priorities, we take a deeper dive into your categorized list and help you determine where to invest and how to save for your competing financial goals.