What Are Your Financial Priorities?

by Manisha Thakor

As we enter the warm, playful days of summer, it may be difficult to turn our attention to the cold reality of personal finance. Yet as any financial expert will say, to continue enjoying our lives to the fullest, it is essential to plan for our financial futures.

Unfortunately, many Americans find themselves in a position of working hard, yet having very little in savings and retirement funds. As a nation, we have learned how to make money, but due to a lack of financial literacy and education, our track record of keeping and growing that money isn’t as strong.

A recent study featured in The Wall Street Journal highlighted two major consequences of this knowledge gap:

  • According to the Employee Benefit Research Institute, 57% percent of U.S. workers surveyed reported less than $25,000 in total household savings and investments excluding their homes. In 2008, only 49% reported such low savings.
  • The survey also found that 28% of Americans have no confidence they will have enough money to retire comfortably—the highest level in the study’s 23-year history.

One key factor is competing financial priorities. In our modern financial world with its myriad of choices it’s hard to know which to focus on first. Do we prioritize saving, investing or debt reduction?

The National Endowment for Financial Education and the Financial Planning Association co-created a nifty online tool that I really like called Financial Four. Its goal is to help you identify the financial areas that are most important for your specific circumstances.

As part of the launch they asked financial advisors what they thought a typical individual’s top four financial priorities should be. Here are their answers:

  1. Live Within Your Means. By nearly 2-to-1, this was the top choice among financial planners and advisors. Spending less than you earn and living within your income allowance is the best way to ensure you meet your financial goals.
  2. Protect Yourself with Adequate Insurance. Ensure your financial security by having adequate insurance coverage in place for health, disability, long-term care, auto, homeowners’ and renters’ to protect yourself and your assets.
  3. Tackle Debt. If you are burdened with a lot of debt, now is the time to honestly assess how much you owe and establish a payoff plan. Immediately stop running up new charges, cut expenses, and prioritize your debt by paying off the highest interest rate accounts first, then applying extra money to the next account when paid off.
  4. Build an Emergency Savings Account. Prepare for the unexpected by having this important reserve. Keep this account separate from your other savings and aim for three to six months of living expenses. Starting with a small reasonable goal—as little as $500—will help you springboard toward building your emergency savings.

If you are reading this list and thinking, “been there, done that”… fear not. That’s why it’s called personal finance. We’re all different. So take a few minutes to complete your own assessment at www.financialfour.org and start prioritizing your financial goals.

[This post originally appeared at MoneyZen.com] For more MoneyZen in your life, follow Manisha on Twitter at @ManishaThakor, on Facebook at /ManishaThakor or sign up to receive Manisha's MoneyZen blog via email by clicking here.

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Manisha Thakor

From Manisha's linkedin profile page:

Manisha Thakor is the Director of Wealth Strategies for Women at Buckingham Strategic Wealth and The BAM Alliance. 

Manisha and her colleagues provide both evidence-based wealth advisory services for high-net-worth households and core asset management solutions for women and families nationwide with $80,000 or more in investible assets. 

An ardent financial literacy advocate for women, Manisha is the co-author of two critically acclaimed personal finance books: ON MY OWN TWO FEET: a modern girl’s guide to personal finance and GET FINANCIALLY NAKED: how to talk money with your honey. She is on Faculty at The Omega Institute and serves as a Financial Fellow at Wellesley College. Manisha is also a member of The Wall Street Journal’s Wealth Experts Panel, a member of the 2015 CNBC Financial Advisor’s Council, and wearing her financial educator’s hat serves as a part of TIAA-CREF’s Women’s Initiative. 

Manisha's financial advice has been featured in a wide range of national media outlets including CNN, PBS, NPR, The Today Show, Rachel Ray, The New York Times, The Boston Globe, The LA Times, Real Simple, Women’s Day, Glamour, Essence, and MORE magazine.

Prior to joining the Buckingham team, Manisha spent over twenty years working in financial services. On the institutional side she worked as an analyst, portfolio manager and client relations executive at SG Warburg, Atalanta/Sosnoff Capital, Fayez Sarofim & Co., and Sands Capital Management. After this she moved to the retail side and ran her own independent registered investment advisory firm, MoneyZen Wealth Management. 

Manisha earned her MBA from Harvard Business School in 1997, her BA from Wellesley College in 1992 and is a CFA charterholder. She lives in Portland, OR where she delights in the amazing Third Wave coffee scene and stunning natural beauty of the Pacific NorthWest. Manisha’s website is MoneyZen.com.