Financial Priorities In Order And Disorder

What will your next dollar earned be used for?

Have you ever thought of putting your financial priorities in order? What’s the most important thing to you? Paying off your debts? Thinking about your retirement or simply buying a house? I don’t think I’m the perfect example in terms of budgeting (I’m far better at making money than spending it wisely!) but I thought of sharing my own financial priorities. You’ll see, I have a few priorities in order and others in disorder!

Financial Priority #1 : Paying Off Debt

It wasn’t the case not so long ago but I moved paying off my debts as my #1 financial priority recently. The reason why I did that was because I noticed that I was continuously buying more and more stuff. A bigger house, a nice car, great vacations, etc, etc, etc. the spending seems to be out of control. This is why at the beginning of 2012, I made a statement of not buying anything on credit anymore and will wait until I can pay cash. Just to bug me, I ran into all kinds of unexpected expenses this year to reduce all my efforts down to 0. Fortunately, I’m now on the right path since September as my “extraordinary” expenses have stopped.

I set automatic payments for all my debts that come out the day after my pay check. That way, I’m sure I can’t spend this money anywhere else and I don’t have to actively look at my bank account to see when I pay my bills.

Financial Priority #2 : Children’s Education

My kids are currently 7 and 5 years old and 9 months. I think it’s crucial that I start putting money aside for them. This is why I started an “education fund” (called an RESP for Canadians). I saving $200 per month. With the subsidies and a 4% investment return, I should be able to build a 90K education savings plan for my 3 three kids.

Financial Priority #3 : Fun Money

The goal of making money is to spend it, right? This is why after paying down my debts and saving for my kids’ education, fun money is my 3^rd financial priority. This includes a budget for wine, restaurants, activities such as going to the spa or golfing, etc. I personally think that life is too short to wait for retirement to enjoy it. This is why I make sure I have fun each week of my life.

Financial Priority #4 : Vacations &  Holidays

Following the same train of thought, planning a vacation ahead of time is important for me. It’s a special time to spend with my wife and kids where we do all kinds of activities together. Last year, we went to Virginia Beach, this year we are going to Disney!

Financial Priority #5 : Retirement

It doesn’t come as my top financial priority for 3 reasons:

#1 I’m young (31)

#2 I have a defined pension plan with my employer

#3 I contribute to my RRSP (the equivalent to a 401(k)) with my year-end bonus

I’m lucky to be in this situation as I surely would have had to move retirement up to my second or third priority if I didn’t have a defined pension plan from my employer. My worst case scenario plan is that I stop working for them at the age of 57 with a full pension of 70% of my salary for the rest of my life. It’s the kind of deal you can’t say no to!

Financial Priority #6 : Home Renovations

Each year, I spend roughly $5,000 to $10,000 on my house. In the past, this went to landscaping, A/C and a pool. Next year, it will be the basement to ensure that I have enough room for my kids. My 9 month old is currently in the hallway on the second floor… not a situation we can stand very long! Hahaha! I hope to reduce this amount eventually but it seems that there is always something required to improve or maintain your house!

Financial Priority #7 : Emergency Fund

How come my emergency fund comes as my 7^th financial priority? It’s like saying that I don’t really care, right? Well, it’s probably the case! Hahaha! I always keep a few thousand available on my line of credit and I’m adding $650 per month in my employer’s stock. These are my two sources of funds if I have a financial problem. I’ve used both of them this year since my car never stopped breaking down at the beginning of the year.

I don’t know why but I have something against leaving $5,000 to $10,000 sitting in a savings account earning little to no interest. I would rather use my money for other things and concentrate on making more money to compensate for any emergencies!

Financial Priority #8 : Car Fund

This is not really a financial priority to be honest. In fact, I have no plan to change my car when it will stop running. My only plan is to keep my cars until they are at least 10 years with over 200,000 km. Since cars lose value very fast, keeping them as long as I can is the only way I can reduce this expense in my budget. Unfortunately, when I have to replace one of my cars, I will have to incur another debt…

What Are Your Top 3 Financial Priorities?

My top 3 are paying off debt, my children’s education and saving money. I’m pretty sure yours are more in order than mine. So what are your top 3?

image credit