Friday, October 29, 2010

Competing financial goals: How to manage them?

I have a number of financial goals.  I would love to save a lot of money to invest, my goal is actually around 6,000 a year, which is roughly 10% of my family's income.  I want to pay down my mortgage to the tune of 5-10 grand a year.  I still want to live well, eat well and take luxurious vacations.  So how can I manage all these goals effectively, especially when I am a working mother who works part time and has daycare expenses & educational savings plan to create?

It's a problem that I am grappling with currently.  Its a matter of prioritizing and also wise spending.  I found it funny this past year, when I went on a cruise, one of my supervisors inquired how much one costs and she told me she dreams of taking one.  The thing is that she makes a lot more money than I do.  I spend maybe 200 dollars a year on my hair (if that).  My hair is relatively easy to style, so I find schools do as good as a job as hair stylists. I don't drive, so I spend 70 dollars a month on transportation.  I don't have a cellphone or cellphone plan.  I really don't have that many people to call.  I do rent movies every month.  I do spend money every month at Dollarama.  I buy my clothes and books in batches at clearance sales.

If I contrast with my supervisor, honestly I have no idea what my supervisor's budget looks like. She always has her hair done, she drive a nice SUV, she's got a fancy cellphone.  I know she goes to bars in her spare time and eats out with friends regularly.  If she lived like I did and cut the expenses I know about, then indeed she could take the cruise and save some money in the meantime.  The thing is that maybe the cruise is down on her list of important items.

My personal opinion is that you should look at your budget and prioritize.  Personally I cut down expenses everywhere so I could have a nice home and be able to vacation where I want throughout the year.  She may want to look nice and drive a nice car more than say take the cruise.  This is where personal choice comes into play.

So what I would like you to do is think about 10 specific items you want in your life and then prioritize how important they are to you.  I'm listing my goals and then ordering them in importance.  I will spend the next week talking about each goal and how to get it as inexpensively/practically as possible.

4.) Invest 6,000 a year
2.) Paid off mortgage
3.) Trip to Europe
9.) Alaskan cruise
5.) Digital SLR camera
7.) 500 wardrobe upgrade
6.) New cordless phone set
8.) A day at the spa
1.) Furniture upgrades in my home 1000.
10.) Personal assistant

These are subject to change and certain long term goals are difficult to rank in importance but essentially I should be spending my money on things that I value.  What are your 10 financial priorities?

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