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How to Stay Disciplined and Do More with Your Money

Have you ever felt frustrated, overwhelmed, or confused about a big financial decision? Most of us waffle about whether we should or shouldn’t spend money or make key financial moves. In this post, Laura gives a simple framework to stay disciplined and make better money decisions in less time, with a lot more clarity and confidence.

 
By
Laura Adams, MBA
8-minute read
Episode #477

 

How to Prioritize Your Finances

You’re probably wondering how it’s possible to prioritize one single aspect of your finances when it all seems critical for success. With so many things that you should or could do to improve your personal finances, how do you decide what’s most important right now?

There are many different pieces of good money management. But here’s the secret: they don’t all matter equally.

There are many different pieces of good money management. But here’s the secret: they don’t all matter equally.

The Pareto principle, also known as the 80/20 rule, is a great structure to apply to your finances. It says that there’s an unequal relationship between inputs and outputs. In many situations, roughly 80% of effects come from 20% of causes. In other words, a small amount of input is typically responsible for most results.

Pareto was an Italian economist who showed that approximately 80% of the land in Italy in the late 1800s was owned by 20% of the population. He also observed that 20% of the peapods in his garden contained 80% of the peas.

In business, companies may observe that 80% of profit comes from 20% of customers. It’s likely that 80% of complaints come from 20% of clients and 80% of sales are achieved by 20% of the sales force.

The 80/20 rule shows that dramatic improvements can be made when you understand what’s responsible for most of your results.

This can be challenging because sometimes what’s most important gets buried under an avalanche of what’s unimportant. High achievers have a talent for being able to separate the two, no matter if we’re talking about improving your health, relationships, career, or finances.

Successful people know what’s essential and act on what matters sooner rather than later. Less successful people typically also know what they should be doing, but don’t do it. They make excuses, procrastinate, or just hope that everything will turn out okay.

So what I’m recommending is that you identify One Money Objective that’s most important to you, so you can live it with gusto, passion, and clarity. Dig deep to uncover what financial activity or concept drives you and gets the results you want more than anything else.

Your One Money Objective may remain constant for your entire life, or it could be a “word of the year” that captures your aspiration and motivation right now and then is re-evaluated in 12 months.

See also: A Blueprint to Prioritize Your Personal Finances

How to Choose Your One Money Objective

My One Money Objective has always been “retirement,” and I’m thankful that my husband shares my resolve. I’m passionate about investing enough for retirement so I’ll always be able to maintain my lifestyle if I can’t work or want to work less.   

Being clear about that objective helps us focus every financial decision. If making a change—like buying a bigger home or borrowing money to start a new business—would jeopardize our ability to fully invest for retirement, we don’t do it.

We fund our retirement accounts first and choose to live in a smaller place, drive less expensive cars, and spend less on vacations than we could afford. We just don’t even think about spending money that’s earmarked for retirement because it’s our number one financial objective.

Your One Money Objective might be family, charity, or self-employment. A good way to narrow it down is to consider what’s causing any financial stress that you may be feeling right now. If your finances aren’t supporting your core values, it can show up as anxiety, worry, and despair.

Another way to recognize your One Money Objective is to acknowledge what’s most important to you. What would make you happy to achieve even if money were no object? Maybe it’s putting your kids through college or starting a charitable foundation. There isn’t a right or wrong answer.

Once you choose One Money Objective you can use it as a guide when you’re not sure what to do. For instance, if you’re wondering if you should raid your 401k to pay off credit cards, ask yourself if doing that supports or defeats your objective. If you’re considering starting a side business or going back to school, consider if it moves you closer to or farther away from your key financial objective.  

If you’re like me and value retirement above all goals, then you never, ever tap your retirement account for any reason. If you’ve accumulated high-interest debt that you need to pay down, get aggressive about tackling it by earning more and cutting expenses without sacrificing your retirement funds.

See also: 7 Pros and Cons of Investing in a Retirement Account at Work

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About the Author

Laura Adams, MBA

Laura Adams received an MBA from the University of Florida. She's an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura's previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.