How to prioritise your financial goals

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Hi there,

Today, I’m starting a series I’m glad you asked!

Don’t make the same mistake I did: I used to avoid planning for retirement because I felt I wasn’t good enough with money, and I was focused only on short-term priorities.

Sandra is different though. Sandra has many financial goals, and she should!

Yet, juggling multiple financial goals can feel overwhelming: should I pay off debt first, save for my emergency fund or invest for my retirement?

With a strategy, you don’t have to sacrifice one for another, and instead make progress toward all of them :)

Let’s get started!

1. Know your numbers

While it's tempting to focus on just one goal at a time, like paying off debt or saving for a big vacation, you might want to consider saving for multiple goals at once. This way, you don’t neglect long-term objectives like retirement.

• Put a number behind each goal: After listing all your objectives: retirement, kids' college, debt repayment, etc., estimate how much money each will require.

  • If you don’t know where to get started, you can use my simulation here for retirement planning.

• Debt vs Savings: As a general rule, if you can make more money from investing than you're paying in interest on your debts, then it’s a good idea to invest!

  • Having said that, if you prefer clearing debt quickly for peace of mind, even if it’s not the best financial choice, that's totally valid too. Do what’s best for you and your mental wellness.

Compound interest is your best friend! No matter what your objectives are, set aside small amounts for retirement, even if it’s just USD 50 a month. The earlier you start, the more you benefit from it in the long run.

The power of compound interest means the longer you invest, the more it will grow (and you develop this saving habit muscle :)

2. Make sure you have a buffer

While it’s essential to keep your mid- and long-term goals, don’t neglect the short term, which can impact your financial stability.

Here’s how you can find the right balance:

• Build your emergency fund: Aim to save 3-6 months of living expenses, which will act as a buffer for unexpected costs, such as medical bills, car repairs, or even a job loss. Without this cushion, you might be forced to rely on credit cards or loans, creating a cycle of debt!

  • If you don’t already have an emergency fund, this should be one of your highest priorities. Start small, setting aside even USD 25 a week can help you build that safety net over time.

• Be flexible with your savings: If life hits you with an unexpected expense, don’t hesitate to use some of the money you set aside for other goals. Instead of turning to debt, reallocate funds from less urgent goals (cf. the vacation fund) to cover the emergency.

  • If you overspend on a vacation, what can you adjust to stay on track? You might need to scale back on eating out or delay another expense to meet your other financial goals.

You always want more than less! When prioritising your goals, ask yourself, "Is this expense truly necessary right now, or could it wait?"

3. If you say “yes” to this, what are you saying “no” to?

Every financial decision has trade-offs. Spending money on one thing means not spending it on something else (even for the rich people)!

• Become a mindful spender: There is a difference between a stingy, a mindful and a foolish spender.

  • Cheap spenders focus on the cost of items, often saying, "I can't afford that."

  • Mindful spenders, on the other hand, prioritise the value of their purchases and typically would say “I choose not to spend on it” after giving a thought.

  • Foolish spenders are more concerned with how others perceive them and would typically ask, "How do I pay?"

• Avoid lifestyle inflation: Just because you earn more doesn’t mean you need to spend more. As your income increases, it’s easy to feel like you should reward yourself with bigger purchases. But remember, every time you say “yes” to something, you’re saying “no” to another financial goal.

  • This is especially true in today’s world, where social media constantly encourages us to upgrade our lifestyles.

Keep your spending in check and align it with your true goals.

Small changes today can lead to big gains in the future!

Thank you Sandra for the question!

In summary, yes, having multiple financial goals each with a specific target amount is key. Start small by saving or investing in each goal, and remain flexible. The key is to be a mindful spender and to spend significantly less than you earn, which will give you a buffer to handle the unexpected and prepare for the future.

Now that you know there is existing strategy for prioritising your goals, are you satisfied with your current money management?

If you’re curious to know how you can implement this, you can use my template Mindful Spending Plan (access here) that allows you to allocate your money toward each goal (short-term and long-term using the Saving Funds) while being thoughtful about how you spend.

If you also have questions, feel free to reply to this email, I’ll try my best to answer your questions.

Build your financial confidence to prioritise your goals,
Sophie

PS: What is one thing you will do differently after reading this newsletter?