Now that things have settled a down bit since buying our first house, a whole new issue has risen. Instead of saving for an emergency fund, savings and a trip to Europe (like before), now there are house related things we want to save for.
Deciding which financial goal to tackle first is more difficult than I thought it would be. Some of the things drive me so crazy that at the moment, they seem like they should be the first priority.
When I’m stuck at home without a car or have to walk a billion miles (okay it’s more like 3/4 of a mile each way) to pick up our kid from school and walk back—getting a second car is the most important thing in the world. Nothing else matters.
But then when I’m having an amazingly awkward time in our creepy tub/shower or remember that it’s been like 3 months since I’ve been able to take a real bath—replacing the tub takes the lead. Suddenly the idea of a second car seems silly.
It’s so hard to prioritize when everything wins depending on the situation. How do people decided which ones to save up for first?
The Snowball Approach
You could always start with the least expensive goal and get that one out of the way. Then continue on to the next one and save the largest expenses for last. There would be a little less waiting between goals, but what it would take forever to get to the most expensive one.
The Quality of Life Approach
Which one would have the largest impact on your quality of life? It would make sense that this one should be done first to increase your happiness and motivate you to continue on the other goals.
The Common Sense Approach
Obviously if your refrigerator stops working, that should be a higher priority than a trip to Europe. Some things just make more sense to tackle first, whether or not they are more expensive.
The Random Approach
If you’re really having a hard time deciding which financial goal to choose first, you could always try your luck. You could write down you goals on small pieces of paper and draw them from a hat (or something along those lines) to determine the order.
The Everything Approach
Sometimes it can be really hard to make decisions, especially when everything appears to be urgent. You might not want to work toward only one goal at a time, so instead you do it all at one. Spreading out your money like that will make it feel like it takes longer to reach your financial goals, but it can feel nice to know you’re making progress all across the board.
How do you decide which financial goals are the highest priority?
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We are gravitating toward a precedence of: quality of life. From a fistful of goals, the boy and I have decided to pursue purchasing a better bed first—although unfortunately it is also the most expensive priority right now, so it doesn’t feel like we are making much progress on anything else. /:
Jennifer Lynn @ Broke-Ass Mommy recently posted..Words of Caution: Things I Am Not.
Yeah, that’s what I worry about if we start with the most expensive one. What kind of bed are you two planning to get?
Jen Perkins recently posted..Potentially The Best Christmas Gift Ever: Mini Survival Kits
When I was in debt a little while ago, I took the snowball approach. It worked for me, and eliminated nearly $9k worth of debt in about a year. Was it tough? Totally! Did it make me cry? Maybe! Would I recommend it? Absolutely!!
Eddie recently posted..Responsible Holiday Party Hosting
Wow, $9k worth of debt paid off in a year—AWESOME! The snowball approach can be crazy motivating for a lot of people. Congrats on getting rid of all that debt.
Jen Perkins recently posted..Down With The Sickness
We definitely take the common sense approach. We stopped paying extra on debt a few years ago because we realized our cars would be breaking down soon and therefore would need to buy new ones (they did and now we have newer ones). Then we wanted to sell our house and move so we then started saving for a down payment. Now we’re going to a slightly different approach where 80% of our disposable income goes to the down payment and the other 20% will go to debt.
Jason recently posted..Is Debt Consolidation an Opportunity – or a Trap?
Good thing you thought ahead about the cars breaking down. That would have sucked big time otherwise.
Jen Perkins recently posted..Changing Our Christmas Ways To Get Ahead
Common sense with a bit of quality of life. I would walk the 10 minutes to pickup my kid and forego the car purchase, because with a little organization you can probably make it work. The tub sounds more important to you, being creeped out is worse than being annoyed by the walk. I don’t have a special fun for each saving goal, I just queue them up as they appear and money comes in.
Pauline recently posted..Can cheap labor make you lazy?
If it was just for the walking to and from school, it would make total sense to skip the car for now. But it’s some other stuff too, I keep meaning to post about it.
Sometimes I wonder if we would do better if we just lumped all of our savings together too, but I would probably spend it quicker.
Jen Perkins recently posted..How Living in a Small Town Affects Our Finances
I’m tackling the items with the highest interest rate. Then I plan to slow down and focus on a down payment for a new house.
Michelle recently posted..Our Vacation Plans for the Next 12 Months
Sounds like a good plan.
Jen Perkins recently posted..Net Worth Update~ December 2012
I try to employ the common sense approach to not only deciding which goal to tackle but with everything in life. If the common sense approach doesn’t give me the answer, then I will strive for the quality of life approach.
Grayson @ Debt Roundup recently posted..Free Shipping Day Is December 17
Jen Perkins recently posted..Potentially The Best Christmas Gift Ever: Mini Survival Kits
‘Everything’ for me, but usually I run into physical limits (you can only redo a room so quickly, for example…) before monetary, haha. And with Christmas travel we don’t want to touch the kitchen until the New Year.
Probably switching to ‘common sense’ soon.
PK recently posted..The Earth Is Flat! Why a Flatter Tax Code is Better (The No Math Edition!)
Lol, yeah there certainly can be limits.
Jen Perkins recently posted..Down With The Sickness
Exciting to get your first house congrats! When we bought this house our chief financial goal was to pay it off, then renovations. We have since saved the cash in 3 and a bit years to pay the mortgage in full just by budgeting. Now we can sit back relax, renovate,travel and save for retirement. In the meantime we tackled all the small goals around the house like you mentioned. Looking forward to hear how your journey turns out! Cheers mate. Mr.CBB
Canadianbudgetbinder recently posted..The Celebrate Like Scrooge Christmas Gift Exchange
Thanks Mr. CBB. That’s amazing that you guys were able to save enough to pay off your mortgage in a little over 3 years. Wow!
Jen Perkins recently posted..How To Decide Which Financial Goal To Tackle First
Goals are always personal. That is they are yours and no one elses. Based on that alone, you get set your priorities. It is your best judgment to determine which are priorities.
krantcents recently posted..How are Your Soft Skills?
Always wise advice from you. Thanks KC.
Jen Perkins recently posted..Changing Our Christmas Ways To Get Ahead
I’ll first make sure that these are not financial goals; they are life goals. Once, this has been cleared I’ll tackle the one that would make my life most pleasurable so I have the mental and emotinal space to cope with the rest.
maria@moneyprinciple recently posted..Christmas gifts at the workplace: a guide to Secret Santa
Sounds like a good approach.
Jen Perkins recently posted..How Living in a Small Town Affects Our Finances
My approach is somewhere between “random” and “everything”. I don’t really have a plan as I go, I just try to save as much money as possible and then decide what I think the best use of it is when the time comes.
It’s probably not the best approach, but it works for me!
The First Million is the Hardest recently posted..Lessons Learned From My First Year Of Home Ownership
The approach that works for you IS the best approach. We’re all so different; I think you’re lucky to have found what works for you.
Jen Perkins recently posted..Net Worth Update~ December 2012
For me, it is a matter of needs come before wants. Such as we needed new window screens but only wanted new carpeting. So we got windows screens this year and had planned on getting new carpeting next summer. But instead, we are selling the place.
Edward Antrobus recently posted..Bad Behaviors at a Company Holiday Party
At least you don’t have to worry about the new carpeting now. It’s really hard for me to put needs before wants sometimes, I’m still working on it.
Jen Perkins recently posted..Potentially The Best Christmas Gift Ever: Mini Survival Kits
I take the needs vs wants approach also. I feel better when I am applying money toward something I need it gives me comfort. I like to work on one at a time in order of importance.
Alexa recently posted..Life Update #1
Working on 1 at a time makes it much easier to keep your focus.
Jen Perkins recently posted..Down With The Sickness
I find that I deal with debt just like I used to deal with bullies when I was a kid: I just get so mad with it that I choose one and go after it with all I have. By the time I am finished with it the other debts are already trembling in their shoes (no pun intended).
maria@moneyprinciple recently posted..Unifying investments – Bring an ISA and a SIPP together
Lol. That is just great, I love it.
Jen Perkins recently posted..Changing Our Christmas Ways To Get Ahead
Love this! I’m currently trying to assess my own goals. I’m taking the approach of timeliness–EF first, then the next pressing goals in terms of when I’d need the money.
The Happy Homeowner recently posted..$1400+ of Travel for $520
If I didn’t “need” everything forever ago, this would be a good idea for me. I’m so silly sometimes about the urgency and necessity of things. 😉
Jen Perkins recently posted..How Living in a Small Town Affects Our Finances
I like to think in terms of a couple of dimensions in this case: what is urgent, and what it most important in the long-term. If something is important but not urgent, or vice-versa, I question it. If both, it moves to the top of the list.
Digital Personal Finance recently posted..Showrooming When Buying
That’s a very interesting approach; thanks for sharing.
Jen Perkins recently posted..Net Worth Update~ December 2012