The Money Professors

The 3 Steps to End Budgeting for Good - Step 3

Step 3 - The Goal Prioritizing Solution

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In this series of posts, Step 1 was our Automatic Account Solution and Step 2 was our 20% Solution. Now we move into the third and final step, the Goal Prioritizing Solution. This GPS will literally guide you towards your major goals without much effort at all. When you combine all three steps your budgeting becomes a set-it-and-forget-it solution - at least for a while. Once you reach one of your goals, you will make a few minor tweaks and then set it again. So the only real budgeting you have to do involves these three up-front actions and then adjustments only after each goal is reached.

​How does it work? Simple. You have to decide what your financial goals are. These may include:

  • Establish an emergency fund of $1,000
  • Pay off Credit Card A
  • Pay off Credit Card B
  • Pay off Car Loan
  • Pay off Student Loans
  • Increase retirement investments at work
  • Save for a down payment
  • etc...

It is critical that you determine your goals. Then you have to align the money being transferred into your accounts accordingly. For example, you may determine that you will pay $500 per month on Credit Card A so instead of transferring the minimum payment of $75, you will instead transfer $500 into the Must-Pa checking account. Next you set up the automatic payment to Credit Card A and this continues until Credit Card A is paid off. Then you move too the next goal.

Of course part of your goal prioritization involves looking at your expenses as well. After all, you want to make sure you are truly prioritizing your dollars. If you say that a vacation in the most important thing to you, but you are spending $300 per month dining out and another $200 er month on entertainment, and you don't have the $250 left over to save toward your vacation, then you need to seriously re-examine whether the vacation is really your priority. If it is, then modify your spending in other categories.

This also makes you take a look at your must-pay categories as well. If your rent is $1,200 per month for example, but you could get a smaller apartment for $800, then that may be a necessary move when your lease is up. You don't have to do this. It just depends on your goal priorities. Likewise if you credit card minimum payment is too high, then you may want to negotiate rates or transfer balances so your payment is lower without paying more interest. This will free up some money . 

So you now have two major categories or bank accounts... the must-pay and the likely-pay. When you align you goals, both short-term and long-term, with your categories, you can see if your spending is truly in line with your priorities. If they are then great! If not, then you can make some adjustments.

Now that is it! You just followed the three steps necessary to completely eliminate budgeting as a routine in your life. Now you can spend more time doing the things you really enjoy, such as reading posts from The Money Professors!​

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Bill Pratt

Bill is an Assistant Professor of Business at Piedmont Virginia Community College. He speaks on topics related to personal finance on college campuses across the country and is the author of multiple books on personal finance. He left the financial industry to focus on helping people become personally and financially successful. He lives in Charlottesville, VA with his wife and their three pets.

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