Without a budget, each month can leave you struggling to find a secure financial foothold. Have no fear, a potential solution does exist. As we learned in the “How to Budget for Success” article, we know 50% of your total income should go towards essential costs and 30% goes towards lifestyle priorities. Then, the remaining 20% goes towards financial priorities, but how do you know which ones to start with?

Here’s an outline of some steps to help prioritize spending and saving.

Day-to-Day Spending

Controlling day-to-day spending is a good first step in achieving your financial goals. Limit your day-to-day spending to only the necessities. Consider skipping that drive-through coffee or bringing your own prepared lunch to work. Creating a budget can help you find opportunities to save, limit expenses, and spend less than you earn. While these savings may seem small, they can add up quickly over time.

Debt

Debt is one of your biggest obstacles to achieving financial freedom and security. Focus on paying off the highest interest and variable debts, like credit cards, first as they will cost you the most money over time. Also, consider making extra payments to your debts, as it will result in a quicker payoff timeline.

There are other debt management strategies, such as debt consolidation and settlement. The key is to figure out what works best for you. For more information on debt and prioritizing which debts to tackle first, read this article called “Understanding and Overcoming Debt.”

Emergency Savings

Having emergency savings as a financial cushion to fall back on allows you to respond to unexpected expenses, such as a sudden auto repair or job loss, without taking on debt. This money should be easily accessible and should cover three to nine months of take-home pay, depending on your circumstances.

Consider checking with your bank or credit union to see if they have a high-yield savings account available for you. They offer higher interest rates than traditional accounts.

Roth individual retirement accounts (IRAs) are also good for building emergency funds. Through taxed contributions, limited to $5,500 annually, the Roth IRA allows you to grow your money and withdraw your contributions with no tax consequences.

Having a budget and paying down your debt first will help to increase the money you have to build an emergency savings cushion.

Planning

Planning for the future is the last step in finding your financial foothold. Planning should include long-term goals, such as retirement savings. The earlier you set aside money for retirement, the more time your money will have to grow. If you have any type of employer-provided retirement plan, consider increasing your contributions. Affordable and consistent contributions will better prepare you for life in retirement.

MERS also provides access to free tools and resources to assist you in retirement planning. Consider using MERS’ online calculators or the Full Picture report builder. This tool allows you to view your retirement readiness, customize retirement goals, and see what steps are needed for achieving retirement readiness.

Take Action

Each person’s budget priorities will be different depending on their unique financial situation. However, prioritizing your financial goals by limiting daily expenses, paying down debt, establishing an emergency savings account, followed by planning for the future is a sound strategy. By following these steps to prioritize your budget, you will be closer to achieving financial security. Use this Financial Goals Worksheet to get started.