Financial Goals: Your Prioritization Guide

Beth Braverman

 You already know the most basic principle of personal finance--spend less money than you make. Once you’ve got that covered, however, figuring out how to achieve all your financial goals at once can feel overwhelming.

 Should you direct any extra cash toward paying off your student loans or saving for retirement? Building an emergency fund or chipping away at credit card debt?

 As you grow your family and advance in your career, there may be even more competing goals, such as buying a house, saving for your kids’ college education or taking a dream vacation.

 In general, this is how you might think of prioritization for your financial goals, from the most to the least important.

 (Of course, the more complicated your finances, the more you’ll benefit from working with a financial planner who can help you navigate your specific situation.)

 1. Protect Yourself Against the Unexpected

 Before working on almost any other long-term financial goals, you’ll probably want to have at least three to six months’ worth of expenses in a liquid account that you can access in case of emergencies.

 “An emergency fund gives you the ability to stay on track no matter what your other goals are,” says Rich Ramassini, a Certified Financial Planner and senior vice president at PNC Investments. This is true even if you have credit card debt. “Let’s say you want to aggressively pay down your credit cards, but your car breaks down and you need a $2,000 repair. If you don’t have an emergency fund, guess where that money is coming from?”

 Bonus: Rising interest rates mean that you save money in an online savings account and it should earn at least a small return.

 Helping to protect against the unexpected also means making sure that you have adequate insurance coverage. That often includes health insurance, auto and home (or renters) insurance, life insurance and disability insurance.

 Although insurance premiums can put a dent in your cash flow, they tend to be relatively cheap compared to the expenses you’d face in a worst-case scenario without such coverage.

2. Start Saving for Retirement

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