If you’ve been following along in this series of posts, you know that I took the Franklin Covey class, “7 Habits of Highly Effective People,” and I’m currently in the process of explaining how these habits can benefit us financially. So, in this segment of the series, we’re moving on to habit three.

Habit # 3 – Put First Things First or The Habit of Integrity and Execution

Things which matter most must never be at the mercy of things which matter least.

- Johann Goethe

This particular habit is about planning. As we all know, planning is pretty important when it comes to our finances. Trying to work our way out of debt doesn’t always happen without a plan. But, there’s a difference between thinking everything in your plan is critical and overwhelming yourself, and planning effectively by putting the important things first.

In this case, the ineffective paradigm of this habit is to think you should put urgent things first, when in reality we should be putting the important things first. As Stephen Covey says, “effectiveness requires the integrity to act on your priorities.” All too often people confuse what is important with what is urgent. Just because something is urgent, doesn’t mean it’s important to us. We mentally make it so because we’ve been conditioned to feel that something urgent is important, but unless it’s life or death, in most cases it’s just not that important.

Habit three talks a lot about separating the two and knowing the difference. In fact, the analogy they use is that of a clock and a compass. The clock represents your appointments, schedules, and various activities. In other words, how you manage your time. The compass represents your goals, direction, and values. Or, what you feel matters most. In the class they tell you that although both are important, the compass must come before the clock because where you’re headed is more important than how fast you’re getting there.

So let’s think about that for a second in terms of our finances. When we sit down and put a plan together for how we’d like to get out of debt or how we’d like to save for retirement, most people put too much pressure on themselves. They set unrealistic goals or they don’t have their priorities in an order that makes sense. The end result is that most people feel like they have too much coming at them all at once and they quit. In reality, the problem is that most people don’t distinguish between what’s urgent and what’s important.

I have a friend that I recently had dinner with and we were talking about life and how it was going. He tells me that he’s been having some financial trouble lately and wanted to know if I could help. I said sure and asked what was going on. My friend said he felt like his paycheck was never enough; he couldn’t comfortably maintain his bills, save for retirement, and include a little extra for himself. This surprised me because he makes twice what I make and I always thought he was fairly well off.

Over the course of the conversation he lays out what he is obligated to: two cars, a 5-bedroom house mortgage, a swimming pool he had installed in the backyard, a hot tub installed on the patio, and he managed to rack up about $15,000 in credit card debt. Did I mention my friend is single?

So, when he told me all of this I told him his problem was that he didn’t have his priorities straight and he was putting urgent things before important things. He asked what I meant and I told him that he didn’t need everything he had, it was only his desire to impress other people that put him in the bind he’s in. He felt that it was necessary to have the flashy cars and house RIGHT NOW instead of waiting until he was in a financial position to do so. Now, he’s overextended himself on credit. In terms of the clock and compass analogy, he placed so much emphasis on how fast he could get there that he forgot where he was going.

It wasn’t important that he have the material things, but the urgency in his mind seemed to make it important, so he believed it was. My suggestion was to pick a car and sell the other, followed by selling the house and getting one that was more affordable. He has some serious soul searching and prioritizing to do, but I think he realized he just had too much. No wonder he was struggling with this retirement accounts and having money left over for himself. He was living beyond his means.

So, in order for you to be financially successful, you have to stop putting those unnecessary, urgent things before the important stuff. While getting your debt paid off is an important priority, don’t let it be the only priority in your life. Don’t put so much into your debt repayment plan that if affects your ability to pay your regular bills. Or, on the other side of that coin, don’t put so much effort into spending money for your material wants that you neglect your debt.

Planning

Planning goes beyond sitting down and making a big-picture repayment plan, retirement plan, or vacation plan…whatever your financial goal is. This habit says that in order to be truly successful, you have to plan your week ahead of time. If you sit down on Sunday for half an hour and plan your week, you’ll find this increases your organization and productivity – which is always good for your money situation – and it will really help you focus on your most important financial goals.

So let’s say that your big-picture goal is to shave off an additional $50 a month to add to your debt repayment/savings/vacation fund. After looking at your budget, you realize that you’re eating out for lunch almost everyday and, since you’ve been working late, you’ve been too tired to cook so you’ve been eating out then, too. After looking at the numbers of what you spent just eating out, you realize you could have shaved off even more that $50.

Ok, so now let’s say you sit down to your weekly planning session. Your goal is to find an extra $50 dollars a month to put towards your overall financial goal(s). So, you have to find a way to save at least $12.50 a week. As you’re thinking about everything going on that week, look for ways where you can save money. You know you’ve got a busy week and you’re just too tired to cook when you get home, so plan for that. Spend some time on Sunday pre-packaging some meals. Put a piece of chicken in foil with some potatoes and your favorite seasonings, then stick it in the freezer. All you have to do its pull it out of the freezer and stick it in the oven.

If the frozen dinner would still have you making a fast food run, then spend a little time cooking on Sunday. Make several meals you can leave in the refrigerator and just heat up. If you see other opportunities to shave that $12.50 off, then do it. But planning your week gives you an overview of what you can expect and you can gauge where you may need to cut back in order to reach your goals.

Obviously the example above doesn’t apply to everyone. Your planning session may be looking over your schedule to see where you can work in some overtime. Or checking to see if a second job would be beneficial. Whatever your planning session needs to be in order for your to achieve your goal, then do it. But, revisiting your plans every week also helps ensure that you’re on track with your big-picture plan, so be sure to check in with yourself.

Recap

The third habit, Put First Things First or The Habit of Integrity and Execution, talks about learning to separate the urgent matters in life from the important matters. It also deals extensively with the benefits of planning, particularly by planning your week. The planning phase isn’t just about finances, though it can help with that. It keeps you organized and on track, which keeps you focused on your goals and helps keep you productive. But, specifically planning your week and focusing on one thing you can do to improve your financial situation, be it save some money, spend less, pay a little more towards a debt, or find a way to reduce a utility bill, will lead you to a more successful financial future.

Do you find that you often put urgent things before the important things? How can you find a better balance in your life so you can focus on your financial goals?