Setting Of Priorities

Managing Your Debt

Setting Of Priorities

18th May 2007

What are priorities and why are they important? How do they relate to money and personal finance? Let's tackle one question at a time. Let us start with a look at what priorities are. The word priority is defined by the Concise Oxford Dictionary as follows:

Priority - 1. the fact or condition of being earlier or antecedent. 2. precedence in rank etc. 3. an interest having prior claim to consideration.

Managing Your Debt Why are priorities important? Simply because they give us guidelines to follow. A priority can help you direct decisions you make about your money and personal finance, they also help identify and make clear your goals and objectives not only financially but in all areas of life.

How do priorities relate to money and personal finance? By setting goals and determining what is important to you, the way in which you spend money, save money and manage money will be directed and affected by your goals. Setting priorities also helps a great deal in your financial planning efforts where your personal finances are concerned.

1. Write Down Your Goals

When making plans it is always better to write on paper what your plans are. It makes it easier to remember and you have a reference in case you forget or need to review your goals.

Don't borrow to pay for expenses because in essence you are creating more debt for yourself. If you are in over your head with debt will getting a debt consolidation loan make sense? You get money on credit to service debt but the credit you've acquired is another debt. Do not use your credit card to pay for your debt if you are already not able to manage your current debt. Save your good credit profile for a real emergency. We need to get rid of this habit of getting loans to service other loans because for most people you end up in a cycle where you get loan upon loan and that spirals your debt out of control.

2. The 5-Year Forecast

I believe to truly achieve financial success a 5-year forecast is essential. Where do you see yourself financially in five years from now? How will you get there? As you grow older your needs will change and after five years it will be time to adjust the forecast for the next five years. This helps keep you focused and on target with your finanial goals.

3. Needs vs. Wants

It is difficult to need and want things all at the same time but we tend to mix the two. Financial planning is of importance in these situations because we are only human and instant gratification is something we all suffer from. Your list of prioritized goals will tend to be focused on the long-term needs like saving for a college fund for the kids. It also helps keep spending sprees to the minimum and thus controls the wants like a new pair of sunglasses.

4. Time Is An Expensive Commodity

The amount of time you spend on planning and reviewing your finances is important. Investing in stocks, bonds, property or savings now could bring you closer to achieving your financial goals than if you where to start two years from now. Use your time wisely because once it is gone, you cannot get it back.

5. Consult With Your Spouse Or Family

The financial decisions you take will affect your spouse and children. It is of utmost imporatance to share your financial goals with your spouse and try to align your plans in such a way that will benefit you both. If you are single you can discuss financial goals with your parents, siblings, close relative or a trusted friend for guidance.

6. Focused Is Easier

We all have many financial goals of which we may not achieve all of them. This is why it is necessary to narrow your goals and objectives to the most important ones which will have the biggest impact on our financial success.

7. Be Realistic

It does not make sense to set financial goals that you know you will not be able to achieve. Set up your goals starting with short term goals first, then mid-term goals, then long-term goals.

8. Keep Your Eyes On The Money

To achieve a goal you ned to determine what that goal is, what strategy you need to follow to achieve that goal and then you implement a plan to execute your strategy. Life happens and you may need to adjust your plan and strategy but the goal should not change. Your goal should enable you to stay focused and key your eyes on the money.

If you have not yet started setting priorities for your financial goals, now is the time to start. If you have never set goals or you have difficulty then visit CNNMoney.com Prioritizer.

"Money isn't everything. It's just most everything." - Nica Clark

Comments (8):

Mica Says: Great Post. These are things they don't teach us in school | 05.18.2007 |

Deanne Says: I agree Mica it's the rich people's way of getting more money because as long as the masses are ignorant of finances then they keep the power | 05.18.2007 |

Isaac Says: I think priorities are good but discipline to stick to the plan is even more important | 05.18.2007 |

Vincent Says: The main problem is we are not taught financial priorities at a young age because our parents don't know any better. That's the difference between the rich and the poor | 05.18.2007 |

Klaus Says: Vincent you are very correct because with the rich people they start training their heirs at age 14 on running the business and managing money | 05.18.2007 |

Kathleen Says: This is a good post and I hope that a lot of people will start to follow the advice | 05.18.2007 |

Vivian Says: It is true that it is difficult to cater for needs and wants at the same time. It has been very difficult for me to not buy what I want especially when I move around with my credit card. I started leaving my credit card at home and it has helped stop me from spending on things I don't really need | 05.18.2007 |

Mark Says: Good post | 05.18.2007 |

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