5 Considerations for Prioritizing Financial Goals

Hope and I married young. Our real-world parenting responsibilities began early in your marriage, which is probably why we yearn to be adventurous as young empty nesters. 

We will eventually travel the world, living in a different country for months at a time. But that’s not until retirement.

In the meantime, we want a change of pace from our suburban life. Hope works in metro Atlanta and travels frequently, so a place in the city makes the most sense. We want to experience a taste of urban life, but we’re equally drawn to the mountains.

An additional priority for us is having a place for the kids to come back to and perhaps even for the grandkids.

Experts recommend the following five considerations for couples when they are establishing financial goals:

1. Financial impact

2. Psychological impact

3. Personal Values

4. Likelihood of Success

5. Consequences of Failure

Here are these five considerations in context, used to establish a financial goals of ours.

Financial Impact

Some would argue that a home is an investment. I don’t agree, so the financial impact that we are focusing on is how a move will impact our cash flow. 

We plan to rent a small place in the city, limiting the variability of our expenses and avoiding the short-term high cost of closing fees and front-end interest payments on a loan.

Meanwhile, we’re going to be on the prowl for a log cabin in the mountains. This would be the home our kids would come back to and where we’d spend our weekends. 

The math needs to work so that our monthly cash flow remains around what it is today.

Psychological Impact

My Money Script is Money Vigilance, which means I am alert, watchful, and concerned about our financial health. Feeling that I have enough money is important to me. So avoiding overspending (or overborrowing) has to be my priority. If it’s not, I can’t be happy.

Our financial goal is a lifestyle goal. Sure, we have a wish list of what we want in our log cabin, but the happiness it will bring falls woefully short of the time and experiences we will have together and with our children in our future home.

Related: Buy Time, Not Stuff

Personal Values

Although I do not see a home as a financial investment, a place for our family to be together is an investment in our happiness. 

We value time with each other, our children, and the rest of our family. 

Our goal of living in a small place close to her work eliminates my wife’s long commute to work, which has been taking time away from us. Of course, a cabin in the mountains is ideal for weekend getaways and family time with the kids when they come back from college.

Likelihood of Success

Setting an unrealistic goal is a plan for misery. The math must add up. For those considering purchasing a home, here are two ratios to remember.

The 28/36 Rule

Financial experts recommend limiting mortgage costs to 28% of gross monthly income and keeping total debt payments, including mortgage, car loans, student loans, credit card debt, and any other debts, below 36%.

Front End Ratio

Mortgage costs / Gross Monthly Income = (should be less than 28%) 

Back End Ratio

Total debt payments / Gross Monthly Income = (should be less than 36%) 

Related: How to Set Money Goals with Your Spouse

Consequences of Failure

Committing to any long-term fixed expense can come with serious consequences.

If we overborrow to buy a log cabin, we expose ourselves to countless dangers and monthly pains. I feel safest when fixed costs are low. 

For most, prioritizing financial health should be a strong consideration. Entrepreneurs have a different take, but unless you’re an entrepreneur, I suggest setting goals that get you closer to happiness without risking a path away from it.

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