Your Priorities – The Missing Link in Your Financial Plan
When you do a financial plan, where do you start?
Do you fund your retirement first or get out of debt? Is trying to save on taxes part of it? One marriage partner thinks you spend too much money on insurance, while the other worries that they are not sufficiently protected.
It can feel like you’re all over the map!
So back to the original question - where should we start?
My answer is to start with the most important thing – to you.
It is my contention that (1) you already have a financial plan, and (2) your plan is built around priorities.
If you’re frustrated about your financial life, I’m guess that frustration arises out of the fact that you didn’t write your own plan and the priorities supporting your plan are not your own.
People do financial planning in one of two ways.
Most people do re-active planning (yes, I know that’s an oxymoron). Re-active planning responds to external stimuli (such as advertising, peer pressure and emotional impulses) to make spending decisions. Since the limited supply of money is invariably exhausted before the unlimited supply of wants, reactive planning usually results in excessive amounts of consumer debt, creating less purchasing power in the long-term, not more.
Worse, re-active planning is almost never aligned with a person’s most deeply held values. How can it be? Deeply held values are usually only discovered as a result of careful contemplation, and are rarely nurtured amidst the noisy cacophony of consumerism competing for your attention.
I believe the right only way to go about it is pro-active planning. Pro-active planning first does the hard work of identifying your most deeply held values, then prioritizing those values, then aligning your spending with those priorities you have identified.
Do you want a plan for your money? Then first, get a plan for your life.
As you engage in the life planning process (and after that the financial planning process), you’ll run smack into the number one economic rule of life: you can’t have it all. You’ve got limited resources and (practically) unlimited wants, so you’ve got to make choices.
You’ll realize there are things you want to spend your money on right now. And there will be things you want in your life that cannot be bought with the resources you have now – so you’ll have to save and or invest over time to have those things. Examples might include purchasing a house, educating children or funding your retirement. But those are just my examples. You’ve got to do the hard work of identifying, then prioritizing what’s most important to you.
Next week, we’ll talk about a process you can go through to identify and prioritize your most deeply held values.
Want to discover the one key that will energize and give direction to your life and financial plan? Discover your own priorities.