We all have competing financial goals, myself included. It can get confusing prioritizing money goals. Here are some of my thoughts on 3 major financial goal categories, based off of what I have seen work for myself and clients.
Emergency Funds:
I believe its important to build up an emergency fund before prioritizing paying off debt. If you don’t have money set aside for an emergency it is likely that unexpected bills (which we all end up with) will keep you in a cycle of debt. Most Americans don’t have $400 ? set aside in case of an emergency.
If you are living paycheck to paycheck, building the muscle memory of saving, and the empowerment that comes along with that, will serve you indefinitely.
Another wonderful benefit of an emergency fund is peace of mind. ? When our stress levels go down we can think more clearly and make money choices from our values instead of fight, flight, freeze or fawn.
How much of an emergency fund do you need? This really depends on your specific obligations and financial situation. The most important part is to start! Start today, and put aside 5 or 10 dollars a week. It will add up over time. ?
Debt:
After your emergency fund is built up a bit, (I usually define “a bit” as one month of essential expenses), you can start focusing your attention on debt as well. There are different strategies out there for debt pay off, like the snowball and avalanche method.
The best strategy is the one that is sustainable over time for you, one that makes you feel like you are making progress and still able to enjoy your life. Extreme deprivation leads to giving up.
Investing:
When your debt pay-off journey is at a point where you begin to feel a sense of relief and release, its time to start investing. Because of compound interest, and the fact that investing is a long-term financial strategy (in my opinion), you don’t need to wait until you are completely debt free or have 6 months of emergency funding set aside.
If investing is new to you, you can start with as little as $5 a week.
The relationship between the 3:
Emergency fund, debt pay-off, and investment—should continue to be a dance. You adjust according to the changes in your life and your goals. I hope this post helps you in prioritizing your money goals!
If you want a guide and accountability partner to make your financial goals a reality, book a free Mindful Money Consultation with me. I can help you implement the change needed to achieve your money goals.
