Financial Literacy: Setting Financial Priorities
April is National Financial Literacy Month, so we’ll be posting information throughout the month on our blog and social media channels to help you make smart money decisions as you plan for your future.
Let’s start by talking about setting financial priorities. Whether you are just starting out or are an adult with a long-established credit history, it is important to set – and periodically review – your financial priorities. Money Management International recommends a three-tiered system of priorities:
- First priority debts cover your basic needs and include your monthly rent or mortgage payment, taxes, insurance, auto loans, utilities and food.
- Second priority debts include secured loans like a car loan.
- Third priority debts are credit cards, medical bills and unsecured creditors.
Keep in mind that everyone’s financial priorities will be different, and that all financial priorities should be addressed, whether they are first or third priorities. For example, let’s say your hours at work have been reduced, so your income is temporarily lower than usual. You still need to pay your third priority debts, but perhaps you can contact your creditors to see if you can lower your payments until your income returns to normal. Being honest and working with your creditors is always better than ignoring them or waiting for things to get better.
To help you set your own financial priorities and to make smart financial choices, use this handy worksheet. Good luck!