How to Prioritize Your Financial Goals

Prioritizing your financial goals may help you reach them faster.

Juggling multiple financial goals may feel like a high-wire act. It can be tough to purchase a home, grow your retirement savings, and save for your child’s future education… and still have money to enjoy life in the present!

In our recent study, we found that though nearly 50% of people lose sleep over their finances, more than 36% feel optimistic about their financial futures and their ability to reach their financial goals.

Taking time to prioritize your goals could help you stay motivated and on track. While everyone’s goals are unique to their financial situation, there are a few prioritization tips that could help.

Key Takeaways

• When setting financial goals, it may be helpful to create timelines and understand how they impact one another.

• Prioritization strategies include ranking for feasibility, urgency, and fit with your overall values.

• Setting money aside in a separate savings account may help you keep track of your progress and, with compound interest, could help grow your savings even faster.

Identify Your Values

Your financial values are closely tied to your personal values and usually stem from how you were raised, where you’re from, your personality, and/or your interests and passions in life.

Taking time to define your personal financial values may lead to better goal setting later on. And remember, values don’t have to be fixed… as you get older (and wiser), it’s normal for your values to evolve. As that happens, your goals (or how you prioritize your goals) may evolve too.

Here are some example scenarios for how values and goals ultimately connect.

If you’re a risk taker by nature (e.g., sky diving is a hobby), then taking risks with your money may seem natural too. You may seek to invest in the latest technology stocks, and having funds to make new investments could be important to you.

If you’re risk averse and can’t sleep without money in the bank, you’d likely want to build an emergency fund so you have savings on hand to help cover unexpected expenses (and potentially rest easier).

If your family always owned a home, then home ownership may feel like an important right of passage for you. As such, saving for a home would be high on your financial goals list. The same might be true if your family didn’t have the means to own a home… that may be a life aspiration for you and saving for a down payment would be a high priority.

There’s no right or wrong answer here. Think about what you want to achieve in a few months, a year, a few years, and so on to help you figure out the goals you want to set.

Create and Review Your Budget

Building a budget could be an effective way to help you achieve your goals and channel your spending to the areas that are most important to you. If you don’t have a budget in place, it’s never too late to create one.

The key to setting up a budget is tracking money flows. Once you know how much money is coming in, and where it’s going each month, you can identify positive and negative patterns and set up categories to manage them.

Budgets come in all shapes and sizes and can be as detailed as you desire. Some people are better with high level buckets of spending and feel comfortable with approximations. Others want extreme detail and manage down to the penny. Create a budget that works for you—it’s your tool.

If you force yourself into a format or practice that is unnatural, you’re less likely to use it. Your budget should facilitate the achievement of your goals: help you identify overspending, under-saving, and opportunities for channeling funds to your priorities.

Review your budget regularly to make sure your goals are on track, and don’t be afraid to make adjustments as needed to fit your current financial situation.

Pro tip: when savings goals are reasonable and realistic, you’re more likely to find success and keep up the momentum. If you only have $400 leftover at the end of the month, setting a savings goal of $30,000 in a year isn’t realistic and could leave you feeling unmotivated to continue.

Make a List of Your Financial Priorities and Goals

Once you have an idea of where your finances stand, you’re ready to figure out where you want to go. Everyone’s financial situation is different and the goals you set depend on your needs and priorities.

Think about your short, mid, and long-term financial goals. These should be a mix of goals that are necessary for financial wellness and others that are based on dreams and life aspirations.

If you aren’t sure where to start when it comes to goals, here are some suggested basics.¹

• Build your emergency savings

• Contribute to retirement accounts

• Pay down high-rate debt

• Save for a home, vacation, or your child’s education

Keep in mind that the goals on your list should align with your values and life stage.

Speaking of life stage… if you’re partnered or have children, your goals will likely be intertwined with their goals or needs as well. For example, if your partner has student loan debt, paying that off may become part of your combined goals.

Assign Prioritization Criteria

Once you have a list of your financial goals, it’s time to prioritize them. Consider weighing each goal against the following criteria:

• Urgency: How soon does your goal need to be accomplished? Short-term goals or goals with tight deadlines may need to be prioritized ahead of longer-term goals.

• Importance: How does the goal align with your life values and priorities? The goals that help you meet key objectives for your life or help you have improved physical or mental wellbeing would be candidates for the top of the list.

• Feasibility: How reasonable and realistic is the goal? If it feels like a pipe dream or something you can’t achieve in your current financial situation, you may want to prioritize other goals ahead of it. Of course, dreams shouldn’t be discouraged. But as mentioned, having achievable goals, even as milestones toward dreams, may help to build momentum and keep you motivated for the longer term.

If you like quantitative approaches, you may want to go the extra mile and make a chart. Here’s an idea.

Assign a numerical value to the severity of each criterion: use a scale of 1 to 5 with 1 being the lowest and 5 being the highest. Here’s how you could lay it out.

Here’s what you could take away from this exercise:

• Paying off debt is feasible, tied for most important, and the most urgent, likely due to the cost of the debt. The chart would direct you to prioritize it first or channel more funds in that direction initially.

• Since building an emergency fund scored close to paying off debt, it may make sense to split funds between these two goals for a time, until one is achieved.

• Saving for a down payment is more difficult and less urgent, meaning it may be deprioritized in the short term. Perhaps you put the smallest amount of funds in that direction or wait until the debt is paid down before you get started.

Would a chart like this work for you?

Create Your Financial Plan

Once you have an idea of your priorities and the goals you want to achieve, create a plan to reach them. Remember, ranking your goals based on their urgency, importance, and feasibility could be a good place to start.

This process may also help you create a plan that allows you to contribute to more than one goal at a time. As part of your plan, create a timeline for reaching each of your goals and check in on your progress regularly. If you need to make any changes based on your finances and the progress you’re making toward other goals, go for it.

You may want to open a dedicated savings account for each of the goals you set to help you grow what you save. Remember, savings accounts earn compound interest, meaning the funds earn interest on the money you contribute and the interest the account earns each month, helping you increase your savings faster.

Remember to reward yourself as you reach those milestones and achieve your goals. You deserve to celebrate your wins after working so hard! Small celebrations may help to keep you motivated long term.

Final Thoughts

Setting financial goals is an important way to channel your money toward what is best for you. And prioritizing the goals you set could help you identify the goals to go after first. As you start building your savings and reaching your goals, you’re on your way to achieving true financial wellness.