How to identify your financial priorities

If you’re trying to reach multiple financial goals at once, it may be time to work out your priorities. Here’s how.

When you’re getting established – in your career, in your relationship, in your family life – it’s tempting to try to do everything all at once. Most of us have felt an inkling of FOMO as our friends and family buy their dream homes, jet away to exotic locations or plan a fun-filled wedding. It’s human nature to want to keep up with the Joneses, and this is particularly true when it comes to your finances.

But when you’re trying to do everything, it can feel like you’re achieving nothing. So how can you successfully prioritise what to do with your money?

The key to prioritising your finances is to set clear goals for your stage in life, says Leigh Goad, a Senior Financial Adviser. You can then “budget” your priorities in the same way you’d budget your income and spending.

“The common theme about life stages is that all stages need to be planned for. The secret to staying on top of our changing circumstances is to plan, to get the budgeting right so that you are actually getting ahead, and to understand clearly how we’re going to achieve our goals,” says Leigh.

Trying to do it all at once

Oscar, 34, is no stranger to financial FOMO, and it wasn’t until he realised he was spreading his resources too thinly that he changed his approach to concentrate on just a few key priorities at a time.

“At 27, I bought an investment property because I thought getting on the property ladder was the key to building wealth. But I also had a car loan, was dabbling in the share market, and I definitely wasn’t budgeting. I realised I was actually getting nowhere fast – even though, from the outside in, the opposite looked true.”

The financial obligations created by having a large mortgage on his home and an interest-only loan on the investment property, coupled with the stress of having to find tenants, made Oscar re-evaluate his priorities. He decided to sell his investment property and refocus his investment approach to reach his goals more efficiently.

How to work out your financial priorities

The simplest way to understand what your financial priorities might be is to have a good hard think about what you want to achieve in life, then list out those goals using pen and paper – by writing them down, your goals go from dreams to concrete realities you can start taking steps to achieve.

Saving for a house, paying for a wedding, starting a business, achieving financial independence in retirement or sending your children to private schools are all examples of financial goals. If you’re not sure where to start (but know you want to), a discussion with a licenced financial adviser can help to tease out what’s important to you. 

Once you know your financial goals, start to prioritise them. For each goal, consider: 

  • What is my timeline for this goal?
  • How much money do I need to save to reach this goal? 
  • With my timeline, how much do I need to put aside each month (or year)?

With this information to hand, and with a solid budget that helps you understand how much money you can put towards your goals, you can start to “budget” your priorities, allocating the available funds to the goals.

By working in this way, you’ll quickly understand what’s most important to you, what’s the most effective use of your money, and if you’re spreading yourself too thin.

You can also make adjustments to your priority budget as you move through life stages, adding in new priorities, removing old goals as you reach them, or reallocating your funds – the important thing is that you’re actively planning and thinking ahead.

Tips for budgeting your financial priorities

Once you’ve identified your priorities, it’s time to start working towards them. From getting rid of debt to saving for super, here are some tips to help you realise your goals throughout your different life stages.

Financial priority: paying off debt
If you’re serious about reaching your financial goals, then paying down “bad” debt, like credit cards or personal loans, should be the first thing on the agenda. Wiping any debt means you can allocate the funds you were using for payments to other financial goals, like investing or paying off the mortgage.

Says Leigh: “Having student debt can affect how much you can borrow; so, if you’re saving for a house deposit – or expect to be soon – it’s a good move to pay off that debt as early as you can. And if you have any lingering high-interest debt – like a credit card – that should be got out of your life ASAP, too.

Financial priority: saving for a home deposit
Saving for that first home deposit isn’t easy, and it comes down to the hard work of budgeting, says Leigh.

“Budgeting is a great habit to get into – it is the same all the way through your life, it just gets more complicated. Getting a deposit together comes down to creating a surplus out of your current income. It might mean making changes to your lifestyle, but people are often surprised at the things they can cut that make a difference."

Financial priority: family life
For many people, this stage of life is often accompanied with settling down and starting a family. “There’s often a wedding, and for most couples, just as the commitments get bigger, there can be a loss of one income when you become pregnant,” says Leigh.

Time flies, and before people know it, there may be children to educate. “I see a lot of people where school fees creep up on them, and it can be another scary cost,” says Leigh. “Again, if that’s a financial milestone that you foresee in your life, it’s something for which you have to be planning for in advance. That’s budgeting, again."

Financial priority: investing
The earlier you can start investing, the better. “If you can put aside even a small amount of your income, week to week, it can have a big impact down the track,” says Leigh.

“You’re doing this in your superannuation, and you’re doing it in your mortgage, and if you can budget to get some of your money into growth assets that can compound over time, it’s a huge benefit.”

Financial priority: planning for the future
As we move into our highest-income years, this is the time to think about maximising our super – whether through salary sacrifice or voluntary contributions.

It’s also the time when we should be most proactive about tax planning and estate planning. “People always think of estate planning as premature, so they put it off,” says Leigh. “But if you’re properly budgeting in terms of your priorities, making sure your family will be looked after should be top of the list.”

Eventually, your retirement becomes the priority. “Planning goes all the way through to maximising your retirement wealth, and how you draw down on it in the way that best suits you,” says Leigh. “In many ways, that’s the ultimate priority – and that’s what all the planning works towards.”

We often get caught up doing everything all at once, and this can mean we lack focus when it comes to managing our finances. But by prioritising what you want to achieve and putting the right steps in place, you can work to create the life you want. 

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