“Everything you want is out there waiting for you to ask. Everything you want also wants you. But you have to take action to get it.”-Jack Canfield
This quote from the famous American Author Jack Canfield seems so relatable at times, isn’t it?
We want everything in our life, from good education to dream houses, cars, grand weddings, foreign trips, and the list can go on. But to fulfil your dreams, you need to take action and prioritise your financial goals. Your income is limited, and to fulfil all your financial dreams with that fixed income, you need to prioritise your financial goals.
In a typical household, the investible surplus is often very limited due to limited income and many responsibilities to take care of; thus, investing that surplus for crucial purposes in life is important. Thus, if you have successfully jotted down your financial goals, it’s time to order them according to their importance. An international trip cannot be your priority over your child’s higher education, isn’t it? That is where prioritising your financial goals come in.
Process of Prioritising Financial Goals
The best approach to prioritising financial goals is to categorise them into the following:
Emergencies:
This includes saving and investing for medical emergencies, financial crises, loss of job, natural calamities and death of the earning member in the family. Now this has to be at the top of your financial goals, as no emergency will knock on your door before coming in.
So, you must always be prepared for the worst. Having a contingency fund, a life insurance policy covering death benefits of the earning member/s of the family, and insuring properties and assets are some ways to save and invest for emergencies.
Liabilities:
This includes loans you have taken and have to repay, like home loans, car loans, educational loans, credit card bills or any such liabilities. Now liabilities come second because you need to prioritise repaying your debt over your desires to avoid the different liabilities eating up a significant chunk of your income.
For instance, suppose you have a car loan to repay and are not paying EMIs on time. The late payment fees and penalties will keep on adding up, which will increase the amount you need to repay to the lender. This, in turn, will decrease your investible income and thus negatively impact your financial well-being. Thus, if you have liabilities, paying them off at the earliest can not only save you from harassment but also help you in securing your finances and financial aspirations.
Responsibilities:
After planning for your liabilities, you need to prioritise your responsibilities. Usually, a person comes with certain financial obligations such as a child’s education, marriage, planning for retirement, annual vacations and similar goals, which are integral parts of one’s life.
Saving and investing for retirement is necessary to financially secure your life after retirement without being dependent on anyone. While prioritising your responsibilities, there can be a conflict of thoughts, especially when you are a parent. You may be confused between saving up for your child’s marriage and your retirement or similar goals.
Now is the time when you need to ask yourself why and what-if questions. You need to ask why you want to pursue both goals. Are you making a choice based on your preference, or is there any external factor that might impact your decision? Then you need to evaluate the outcome of choosing one goal over another and come up with the best and worst possible cases. Once you do it, you will get your answer and easily prioritise.
Desires:
This can be anything from an exotic vacation to buying jewellery/ luxury cars/ apartments, or anything you desire but not a necessity. This needs to come at the end of your priority list after you have taken care of your emergencies, liabilities and responsibilities.
Once you start prioritising your financial aspirations in the right manner, you can easily achieve most of them and also build a solid financial foundation for your family and future.
