Before you can do anything to improve your financial situation, save more money, or build your retirement fund, you have to master a few basic financial steps. You must learn the importance of prioritizing your finances. Without this, you won’t get your money in order.
Here are four basic tenets of prioritization.
1. Choose your most important goals
Narrow down the goals you have for your finances and place them in order of importance. Odds are you can’t possibly meet all your financial goals at once. For this reason, you have to prioritize and make sure you concentrate on the most important ones first.
2. Focus on meeting important goals
There will be times in your life when your financial status will depend greatly on your ability to focus on the most important goals you have for your finances. Sometimes you’ll encounter conflicts that will cause you to put your most desired goals behind the important ones.
For example, you might have to put on the backburner a vacation you’ve been planning if you encounter another financial issue, such as a job loss or a drop in income, or an incident that requires you to empty most of your savings account.
3. Choose goals that make you comfortable first
Yes, your retirement and your kids’ college education are important. However, it might be more important to build a small nest egg so that you can care for yourself and your loved ones in an emergency situation. An emergency fund might make you feel more secure and comfortable than building a college fund for a 2-year-old.
Some goals can be taken care of later, as long as what makes you feel financially comfortable is addressed first.
4. Consider important goals and how you can help them along
Important goals are not the same for everyone. For example, your most important goal might be saving enough money to use for a down payment on a home for your family. This is a goal that should be labeled important and fostered.
You can pursue a goal like this by shopping around for low mortgage interest rates It is much like what you’d do if your most important goal were buying a new car and you had to save money for that. You could save money with that goal in mind, and move closer to it by shopping for a car in a good price range that has a low interest rate.
Financial freedom is not impossible to achieve if you do it right. However, if you don’t know where to start, chances are good that you won’t do it right. Learning these steps can help you significantly on the path to financial freedom.