Financial Priorities: Separating the Essential from the Important

Rewriting your financial story can seem overwhelming.  There is so much advice and so many things you could do that the tendency is to give up and do nothing.  However, there are only a few things that are vital, especially when you are just getting started.  So here are some thoughts to help you separate the essential from the merely important:

Why is more important than what and how: I recently finished reading the excellent book Start With Why, by Simon Sinek.  The main point of the book is that the best leaders in the world all have a clear and powerful why that is at the center of everything they do.  They spend most of their time and energy communicating the why, and people that believe in their why follow.  Less able leaders, on the other hand, focus mostly on what they do and how they do it, rarely getting around to communicating why.  They may not even fully understand their own why.  The mantra of the book is, “People don’t buy what you do, they buy why you do it.”

Rewriting your financial story requires a high level of self-leadership and is not possible without a clear and powerful why as a foundation.  Your first step has to be discovering and articulating your why.  After you have discovered your why, use it as a guide for all your financial decisions.  Keep it before you at all times, orienting you like the North Star.  You will figure out the how and what, but it is the why that will keep you on course when things get tough.  Why is essential; how and what are important. 

Direction is more important than speed: My grandson, Ashton, is just about to start walking.  He loves walking with help but he is not quite ready to take off on his own yet.  Soon he will take his first solo steps.  They will be slow, cautious, and unsteady but each one will be a reason to celebrate.  Speed is not expected at first.  He will be learning an important skill and making progress.  Eventually he will learn to walk faster, and then to run, but at first each tentative step will be a wonderful thing.

Ashton Learning to Walk

Ashton Learning to Walk

Like learning to walk, as you rewrite your financial story direction is more important than speed.  If all you can do right now is to take a few small, cautious steps forward then do what you can and celebrate those steps.  Eventually you will want to learn how to move forward faster but moving in the right direction, even slowly, is reason to rejoice.  Direction is essential; speed is important.

Habits are more important than goals: Financial goals are tricky because so much of your success or failure in meeting them depends on circumstances beyond your control.  You could be doing everything right but an unexpected emergency or a downturn in the stock market may derail you.  Habits, on the other hand, are completely within your control.

Furthermore, you will likely find it close to impossible to reach your financial goals without establishing sound financial habits, but with a foundation of good habits you will make financial progress with or without goals.  Sound financial habits include keeping score to ensure you spend less than you earn, paying yourself first, avoiding credit card debt, and increasing your retirement savings with each pay increase.  Habits are essential; goals are important.

Technology is more important than willpower: Former Money magazine editor Craig Matters advocates using “technology as a substitute for willpower…” by having money automatically deposited in retirement and savings accounts every time you get paid.  While willpower is important in rewriting your financial story even the most disciplined among us have a limited supply of it.  The more often we rely on willpower the more likely we are to slip up.  Using technology to limit our reliance on willpower will allow us to save our willpower for the times when it is most needed.  Technology is essential; willpower is important.

Simplicity is more important than perfection: One of the worst financial mistakes you can make is to do nothing out of fear that what you decide to do won’t be perfect.  A simple solution that works, and that you understand, is far better than a complicated solution that you don’t understand.  Indeed, complicated financial products usually work out far better for those selling them than for you.

Speaking of simplicity, John Bogle, pioneer of index funds, the ultimate simple investing solution, stated:

“The great paradox of this remarkable age is that the more complex the world around us becomes, the more simplicity we must seek in order to reach our financial goals.  Never underrate either the majesty of simplicity or its proven effectiveness as a long-term strategy for productive investing.  Simplicity, indeed, is the master key to financial success.”

Don’t waste your time searching for the perfect solution to every financial problem.  Find a simple solution that works and move on to solving other problems.  Simplicity is essential; perfection is impossible.

Time is more important than money: Did you hear the one about the guy who thought the 40-hour work week was such a good idea he did it twice every week?  Once your needs, and perhaps some of your wants, are satisfied it becomes increasingly expensive – and foolish – to trade more time for more money.  If happiness is your goal time to build relationships, relax, and enjoy life cannot be neglected.

Erin Callan, a former CFO of Lehman Brothers who lost her job in the financial crisis and has stepped back from the world of power and money to gain more balance in her life, confessed,

“It may seem like a strange thing to say, but sometimes I’ll look around and I’ll see a huge yacht or we’ll go by a beautiful house, and the first thing that comes into my head is not like, ‘Oh, wow, wouldn’t that be great?’  The first thing that comes into my head is, ‘I wonder what they are giving up to be able to have that.’”

Think twice before giving up too much time for money.  Time is essential; money is important.            

Saving is more important than income: There is a lot of truth in the old cliché “It’s not what you make, but what you keep, that counts.”  Someone that makes a moderate income and develops the habit of regularly saving10% or more will be much better off in the long run than someone who makes a lot but spends it all.  Saving is essential; increasing your income is important.     

Saving is more important than investing: Saving is the foundation of financial success.  Without saving first you will never have any assets to invest.  A habit of regular saving is where it all starts.  That is why I consider your personal savings rate to be the most important measurement in personal financePhil DeMuth sums it up perfectly: “‘Save’ – the sum of all financial planning wisdom in one word.”  Saving is essential; investing is important.

Behavior is more important than knowledge: It doesn’t do any good to know everything there is to know about budgeting if you consistently spend more than you earn.  Understanding the concept of compound interest is useless if you continue to rack up credit card debt and don’t save.  Index funds allow you to become an above average investor with very little knowledge – if you can control your behavior.  The principles of personal finance are not difficult but controlling our behavior is.  Behavior is essential; knowledge is important.

Your behavior is more important than the market’s behavior: Most of us worry far too much about what the market is doing and far too little about our own behavior in response to it.  Over the long term the day-to-day dance of the markets has little meaning but our reaction to it can mean the difference between financial independence and financial insecurity.

Poor behavior causes investors in mutual funds to vastly underperform the funds they are invested in.  As one of Carl Richards’ brilliant drawings show, this difference is known as “the behavior gap.”


All it takes to avoid this gap is the discipline to do nothing – or at least nothing new.  Simply ignore your emotions and stick to a long-term plan of regular investing whether the market is up or down.  To turn an old cliché on its head, “Don’t just do something, stand there.”  Your behavior is essential; the market’s behavior is meaningless in the short term and important, but beyond your control, in the long-term.   

Big financial decisions are more important than small financial decisions: Getting the big things right – housing, transportation, avoiding credit card debt, paying yourself first, saving for retirement – will drive the plot of your financial story.  Small day-to-day decisions add up, and do make a difference, but they are not nearly as important as the big-ticket items.  Getting the big things right will provide a margin of safety for the occasional slip-up on smaller items.  After all, we are all human.  However, if you get the big things wrong then day-to-day mistakes could put you over the edge.  Big financial decisions are essential.  Small financial decisions are important.


Setting priorities is a vital skill to develop on your financial journey.  Focusing first on the essential, and only later on the important, will allow you to make the quickest progress along the exciting path to rewriting your financial story.

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