Money Basics Part 2: Prioritizing

Now that you know where your money is going, it’s important to decide where it SHOULD be going. If you’ve been forced to reduce your spending due to a sudden loss of income, you can still focus on priorities to get you through this tough time. Having a long-term goal in sight when you’re digging for change to buy groceries can be helpful; I promise, I’ve been there. I was out of work for a few months (not long at all compared to what some people are enduring) and we were living on credit cards until I could find something new. My goal was to charge as little as possible, so we’d have a smaller burden to escape from once I was employed again. If you’ve decided to reduce your spending for your own reasons, it still helps to have your priorities in mind when temptation strikes.

If you have a spouse or significant other you share expenses with, you should start with an honest, open discussion about what your priorities are as a team. Two cart horses pulling in opposite directions aren’t going to get anywhere. If you’re completely dedicated to saving, and your SO is shopping or eating out, it’s going to create strife in the relationship. Having agreed-upon goals set up ahead of time will prevent issues (hopefully; I mean, I’m no therapist). Maybe you want to cut your household spending by 50%, and this horrifies your partner. Explaining why this is a goal for you, for example “I’d like us to take that trip to France we’ve always talked about”, can help them see your point of view. At the same time, you may have to compromise, and agree to reduce spending by only 20% for now, or maybe have an allowance of “fun money” you’re not allowed to cut.

So what are your goals? They don’t have to be lofty, long-term ones; in fact it often helps to have small, achievable goals, especially at first. “We need ‘x’ amount in savings for emergencies”, “Paying a car off early”, “Saving for a weekend trip to the beach”, “Saving the down-payment on a house” can all be valid goals. Having a long-term goal as well, like “Retire by 60”, “Pay off the house”, “Have zero credit card debt”, “Trip to New Zealand” can keep you moving in the right direction, while small goals keep up your motivation along the way.

Hubby and I have our goals set up like dominoes; as we complete one, we move on to the next. 1) Have ‘x’ amount in savings to cover emergencies. 2) Pay off his car early (we already met our goal of paying mine off early). 3) Save up to re-side the house. 4) Save up to build out our second-story porch we’ve always wanted. As we achieve a goal, we high-five and do a little dance, and get started on the next one. It makes it so much easier for me to pass by Taco Bell by saying “Nope, we’re saving for goal #1”. Of course, we indulge sometimes, but not nearly as much as we did before I started watching the budget.

Your goals will be unique to you and your situation, although there are some that are fairly universal. Seeing progress on your goals (even if that progress is simply not going further into debt), will help motivate you to reduce your spending. Keep track of where you are on your goals, and how much you’re saving. Those concrete numbers will help keep your goals firm in your mind, and reduce back-sliding. Everyone slips up now and then, though. Don’t beat yourself up, or throw in the towel if you order pizza, or buy something you didn’t plan to. Use it as a learning moment for yourself, and try to keep on your path in the future.