3 Important Priorities – Basic Needs, Security, and Dreams
Today I want to look at 3 important priorities to help you build toward financial freedom.
Do you know what a priority is?
According to the dictionary, a PRIORITY is “a thing that is regarded as more important than another.”
If you want to build a home, you cannot start with the roof. You need to start with a solid foundation and then build the walls, with doors and windows, before putting the roof on. If you don’t start with a solid foundation and then build UP, you will be left with a messed-up home that is dangerous and disjointed.
Now, from a financial planning perspective, there is also an order of priorities. These priorities flow into each other and today I want to take a brief look at 3 IMPORTANT PRIORITIES IN BUILDING TOWARDS FINANCIAL FREEDOM…
- 1 – FOUNDATION PHASE: where you can take care of your basic needs
- 2 – SECURITY PHASE: where you can provide protection
- 3 – GROWTH PHASE: where you can build towards your future, and go after your dreams and desires
It is wise to set a solid foundation and then build up toward your dreams.
Let me give you an example:
PRIORITY 1 – FOUNDATION PHASE: BASIC NEEDS
- You need to earn enough money to live on, and to cover your basic needs:
- Out of your earnings you need to cover your rent, food, transport, and to provide for your family.
- Your budget is an important starting point:
- Your budget will show you where your hard-earned money is going,
- You need to live within your means. This may include cutting wasteful expenditures and eliminating debt,
- It is also important that your INs are more than your OUTs (that you earn more than you spend), or you will be left in serious trouble.
PRIORITY 2: SECURITY PHASE: PROVIDE PROTECTION
- Your security phase is to protect your family and yourself, as well as your assets. If you do not take care of this phase, you could end up losing what you have or not being able to provide and protect your family in the event of a calamity or crisis. It is therefore important that you:
- Build up a cash reserve to fund unforeseen needs and emergencies (set funds aside out of your budget to build up surplus funds [a reserve] to cover unexpected expenses and to ensure you have cash flow should go through a financial drought or lose your job)
- It is also important that you provide protection for your family and yourself in the event of death, disability, or illness.
- It is also important to invest towards your retirement.
- It is also important that you have insurance in place to cover your home, your car, and your valuables in the event of theft, or a natural disaster or accident.
PRIORITY 3 – GROWTH PHASE: BUILD TOWARDS YOUR FUTURE & GO AFTER YOUR DREAMS
- Once your basic needs are taken care of and you have the needed protection in place, you can now go after your dreams.
- This is where you can invest surplus funds to create wealth and grow capital, with the aim of achieving your dreams and where you can make a significant positive impact in your world.
Now, in order to build towards financial freedom and find out where you are when it comes to your financial priorities, you need to follow a process, which begins by asking yourself the following questions:
- Where are you at present? – in terms of your needs, analyze your current situation.
- Where would you like to be? – set out your goals and objectives.
- How can you get there? – set up a plan, and a budget, in order to help you achieve these goals.
“Good planning and hard work lead to prosperity, but hasty shortcuts lead to poverty.” (Proverbs 21.5)
You need to create a map (plan) to get from…
WHERE YOU ARE AT PRESENT
TO…
WHERE YOU WANT TO BE!
This is where a financial planner is important. A financial planner should be able to help you review your current situation, together with your needs and your future dreams. They will then be able to help construct a plan to help you provide for your current needs and protection while helping you build towards financial freedom.
Summary:
- You need to prioritize your financial goals.
- What level are you at? Where do you want to get to? How are you going to get there?
- Are you able to fund your living expenses out of your income?
- Do you have protection in place to protect your family, yourself, and your assets?
- Do you have a plan in place that can build towards helping you reach your dreams?
- First, you need to cover your BASIC NEEDS – stick to your budget (FOUNDATION PHASE)
- Then you can put your PROTECTION in place (SECURITY PHASE)
- Once you have covered your BASIC and PROTECTION NEEDS in your FOUNDATION and SECURITY PHASE, you enter the GROWTH PHASE and put a plan in place to meet your WANTS and DREAMS (build your dreams)!
As you can see, financial planning is a process: What you need to do is…
Firstly, you need to cover your basic needs:
- This can be done with a simple BUDGET
- Set up plans ensuring you LIVE WITHIN YOUR MEANS. You need to aim to live on less than you earn
- Try to live on 70% of what you earn
- Settle debt as quickly as possible and set funds into savings and investments (This takes you to the next level…)
Secondly, you need to build up security measures to provide financial protection:
- Build up a RESERVE – save to build up a reserve fund to provide for emergencies and opportunities that may arise unexpectedly from time to time.
- Bring in RISK PROTECTION – Life can be unpredictable. You can usually counter financial risk by making use of ASSURANCE, INSURANCE, AND HEALTHCARE COVER. You can protect your loved ones, yourself, and your assets by having sufficient life cover, disability cover, healthcare cover, and short-term insurance. You need to manage the risk. Do you have sufficient life and disability cover to settle debts and to provide for your loved ones in the event of an unforeseen or tragic event? Are your assets insured? Do you have a Will? When last did you review your cover? Get advice and make sure that you have the correct risk protection in place.
- Build up your investments for RETIREMENT – To build up sufficient funds for retirement, you need to save a portion of your income over your working career. The risk is that if you do not save towards retirement, you will not be able to retire comfortably. The longer you put it off, the more it is going to cost you to retire comfortably, and the more difficult it becomes to even be able to retire at all (remember only 6 out of every 100 South Africans reaching the age of 65 can afford to retire!)
- Build up your savings to fund your CHILDREN’S TERTIARY EDUCATION – When your children are still young, aim to put savings aside to build up a lump sum to fund your children’s tertiary education.
The FOUNDATION PHASE (TO COVER YOUR BASIC FINANCIAL NEEDS) and the SECURITY PHASE (TO PROVIDE FINANCIAL PROTECTION) are vital. These 2 PHASES deal with what you NEED.
Once your NEEDS are taken care of, you can enter the GROWTH PHASE (BUILD TOWARDS YOUR FUTURE) by going after your WANTS and DREAMS.
The FINAL LEVEL is therefore to INVEST TO GROW FUNDS to be able to ACHIEVE YOUR DREAMS!
Build your dreams (in other words, “What do I want?”). Determine what your financial dreams are:
What are your big dreams? Once you have your basic needs and security phase in place, you can go after your dreams.
Your dream may be one or more of the following…
- to retire early,
- to settle your bond within 5 years,
- to take your family on a holiday vacation,
- to start your own business,
- to pursue a dream business or hobby,
- to become a philanthropist and be able to support a worthy cause or ministry,
- to build up enough income to free up your time so that you can go out and impact this world,
- to go into ministry,
- to build up savings to set your children up for a brighter tomorrow,
- to be a blessing to others.
I would encourage you to…
- Dare to dream. Aim high. Lift the lid. Expect the best. Live on purpose. Live with passion.
- God made you one-of-a-kind and He has a destiny for you to fulfill. May God launch you into your destiny!
“Commit your actions to the LORD, and your plans will succeed.” (Proverbs 16:3)
Conclusion:
- What are your needs? What are your dreams?
- Are your priorities in the right order? If not, what needs to change?
- Where are you now?
- Where do you want to be?
- What plans do you need to set up a plan to get from where you are to where you want to be?
PRIORITY 1
- Set a firm foundation – Cover your basic needs first.
PRIORITY 2
- Put financial security in place to provide protection.
PRIORITY 3
- Go after your dreams. Set up a strategy to achieve your goals.
First, set up your foundation. Cover YOUR BASIC NEEDS. Then build in SECURITY. And once these foundations are established, go after your DREAMS.
“Trust in the Lord and do good. Then you will live safely in the land and prosper. Take delight in the Lord, and he will give you your heart’s desires. Commit everything you do to the Lord. Trust him, and he will help you. (Psalm 37:3-5)
