Priorities. Important, but difficult to get in order. This is particularly true when it comes to personal finance. Some of the people I have coached insisted that they wanted to increase their savings rate for retirement, but first they need to add an addition to their house, get a new car, travel with their family, and the list goes on and on until the savings rate is minimal or nonexistent.
In our own family, I sense this desire to spend creeping in as we draw nearer to becoming debt free. I’ve planned out the trips, created wish lists for clothing, a new camera, a 12-passenger van for our growing clan, a pop-up camper for us to test out camping in national parks… I find myself getting dragged down into these rationalizations that we aren’t guaranteed tomorrow! These things will make our lives happier and more fulfilled! They’re really great investments in our future! My kids NEED these things! My inner strong-willed two-year-old starts stamping her foot. But she’s stamping it right on top of her other foot, only causing pain to herself.
While the lists above aren’t bad or morally wrong, are they really needed? Do they really take priority over purchasing our freedom from needing to work a 9-5 to cover the bills? Will they really make us more satisfied, or will they only become shinier and more “impressive” artifacts that eventually age and rust? How do you prioritize?
The oldest answer in the book is to “pay yourself first.” Take a percentage of your income off the top, just like you would a tithe if you’re religious. Pretend like that money doesn’t even exist in your budget, and don’t touch it. It’s really easy to me to try to play with numbers and move the money from our planned retirement savings to our planned van savings. That’s where maturity and self-discipline steps in. There’s no one telling you what you can and cannot do with your money! So your “why” needs to be big enough. To reach FI in 17 years, we need to aim for a 50%+ savings rate. That savings will be particularly important if the market takes a downturn. That’s the time to start shoveling in the funds!
However, we will eventually NEED clothes for the kids and a larger van to hold more kids (we’re insane). We do WANT to go on amazing local and international trips with our family and to enjoy cameras and kitchen appliances.
The first step is to identify the category that the item falls into: needs vs. wants. If that item is a true need, we start a sinking fund. Our family is averse to going into debt for depreciating assets. We really do not want to go back into debt if there’s any way we can help it. Instead, we save a large “car payment” every month to save up for the vehicle that we want. Same for the clothing needs. We create a separate fund for clothing for when needs arise.
For wants, we try to get more creative. It’s important to wait for a few days or even a few weeks when considering wants. Impulse-buys can suck you dry! If we still realllly want the item or experience and believe that it will bring tangible value to our lives, we get to work! For trips, we’ve really enjoyed getting started on travel hacking with credit card rewards. For our eventual camper, we plan to buy used and only after we’ve already met our savings goals and needs goals.
We aren’t perfect at all of this. I still ooh and ahh over Disney anything. But if we put these “rules” in place for ourselves, we can still achieve our big dreams without getting side-tracked by materialism and waste. I hope this was helpful! Feel free to share your favorite prioritizing tips!
