In order for priorities to be profitable, they must first be planned and then be practiced. There are two things that are most difficult to get people to do: to think and to do things in order of importance. This is the difference between a pro and an amateur.
Step one is the thinking part. You’ve got to put together an action plan that gets you where you want to go as efficiently as possible. Here are the priority areas as I see them for any well-rounded financial plan.
Protection - A catastrophe can eliminate all the forward progress you’ve made overnight. Protection is the most ignored area of personal finance I see, but it may be the most important. It is equivalent to the defense on a football team. How well does any team do that has a poor defense?
Savings - Do this first, then spend what’s left over. I recommend 15% as a starting point for your thinking. More is fine.
Spending - The bottom line on any spending plan is that it must save money, stay out of debt and leave enough to live on. If you can do those three things, as far as I’m concerned, you can write your budget plan on the back of a napkin.
Debt - The reason most folks have consumer debt is they didn’t have any savings when they needed or wanted to buy something. Generally, buying stuff you consume with consumer debt is a bad idea.
Investing - If you want to get ahead in our capitalistic system, you’ll probably have to invest, at least to some degree. If not, you’ll have to save huge amounts of money. Yes, this means taking some risk with your money, so work with a pro that can put an understandable plan together for you.
Development - Here’s one the almost never gets enough attention. The most valuable asset on your balance sheet is probably you. What are you doing this year to increase your value to the marketplace? Always think of improving your resume.
So, ideas will get your thinking started about planning. Now, what do I mean by practice?
I can’t count how many good intentions have walked through my office. Almost everybody “intends” to go see a lawyer about wills, review their insurance, save more money, pay down debt and invest more money. But somehow…those good intentions don’t ever materialize into real life actions.
Why? No accountability.
I often hit the exercise room at home at six in the morning. It’s a pain getting up early and getting there and doing it. I could use the extra sleep. If I’m running late, it doesn’t happen.
So why do I even bother? Because I want to live a long and enduring life.
Most of us need accountability to do hard things; things we need to do and that our own self-motivation is often inadequate to get us to do on our own.
Priorities are rarely set without a plan. And they are rarely practiced without a person.
So, who’s helping you do what you want or need to do, but don’t always feel like doing?
My guess is that will be the key to you practicing, rather than just planning your priorities.