HOW TO BALANCE YOUR FINANCIAL PLAN AND PRIORITIES

The key is not to prioritise what is on your schedule, but to schedule your priorities – Stephen R. Covey, American author of ‘The Seven Habits of Highly Effective People’
Indeed, very few people in the world are independently wealthy and have enough money to achieve all their financial goals simultaneously. Most individuals play a juggling game with money as they work toward several different financial goals. All financial goals are important, but some goals are farther down the list of financial priorities.

Whether you know it or not, you could be meeting your financial priorities often. For instance, you may have decided that settling this month’s electricity bill is more important than buying a new piece of furniture. But sometimes it seems like, try as you might, you never have enough money at the end of the month.

Setting priorities is fairly simple – you just need to decide what issues you need to take care of and then put the most important ones on top of the list. The five most basic priorities that you must deal with are obtaining your necessities, meeting other financial obligations, repaying your debts, building an emergency fund and saving for your goals.

1. Necessities
First of all, there are basic principles that pertain to everyone and which are a matter of survival. These are food, water and shelter. Therefore, to begin with, you need to do what it takes to ensure that your basic needs are met. This means that you have to:

Pay the rent or mortgage
Settle the utility bills
Buy your groceries
You should not spend another shilling before making these payments. If you put them off, you will start experiencing money problems much sooner than you would if you had delayed paying off other expenses instead.

2. Other obligations
Next, you need to consider other day-to-day expenses, such as transportation, which you incur as you seek to maintain your source of income. In the same breath, school fees, medical expenses and other such financial responsibilities you have must be taken into account.

These should be considered as important as your necessities, since failing to provide for them may result in you having to obtain a loan to make it to the end of the month. However, you should consider ways of cutting down these outflows so that you do not just get by after settling these payments.

3. Debt repayments
Making the minimum repayments on your loans should be high on your list of priorities, to avoid the fees and penalties that could otherwise occur. However, this may not be enough to get you out of debt, since high interest rates could still make your balance much higher.

Ideally, you should use any extra income to pay down your high interest debts aggressively. After eliminating your debts, you will now have some extra money to put towards other financial goals.

4. Emergency Fund
No matter how hard you try to plan, the unexpected always happens, which is why you need to be prepared by having an emergency fund. Not only will it help you in dealing with unanticipated expenses, but it will also prevent you from getting into debt in the future.

Hence after settling your expenses, you should strive to save enough money to sustain you for six months. This will assure you peace of mind knowing that you have something to get by with should you find yourself short of cash.

5. Savings
If you manage to make it until this point, then your finances must be in good shape. Having savings so far down on your list of priorities does not necessarily mean that putting away money towards such important financial goals as your retirement should come last.

In fact, due to the tax exemptions available on retirement contributions made directly from your pay check, it would be more advantageous to have your employer make these payments to your retirement benefits scheme. Automating your other savings would also save you time and effort.

As for everything else, remember that it costs money, and with so many things to spend it on, you must balance your finances. The key lines in determining what your financial priorities are and sticking to them. And of course, you must be willing to rethink them when the need arises.