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09 May 2018 | Written by Daniel Dewitt

Placing Priority on Savings, Emergency Funds, and Debt


In the hustle and bustle of the modern world, it’s easy to get lost in the demands and challenges of everyday life. We have a limited amount of attention and focus, and too much of our bandwidth is focused on the here and now. And because of that, we often lose track of and neglect important long-term financial goals like savings, emergency funds, and debt management.

But those three fundamental pillars of financial stability are important, and should not be overlooked in your financial planning. While it is easy enough to say that, the real question is how to put these principles into practice. How do you prioritize these important aspects of your financial health when you already have so much going on? That exact question is what we’re here to answer today.

What’s So Important About Those Three?

The reason savings, an emergency fund, and debt should be prioritized over other aspects of your finances is that they’re the pillars upon which all your financial stability will rest. Having savings is important because it allows you to plan for the future and work towards long-term goals, whatever those goals are: a vacation, a car, or retirement.

An emergency fund is important because it allows you to weather financial crises without endangering your long-term goals. While on a singular level these emergencies are unpredictable, statistically you know they will most likely affect you at some point. Much like insurance, an emergency fund is an important aspect of protecting your long-term financial health.

Finally, debt is important to deal with because if you don’t address and manage it properly, it can gnaw away at your finances like a cancer, slowly weakening them and dragging you further away from attaining your long-term goals. While there are times when taking out a credit card or signature  installment loans is the appropriate action, you should always endeavor to pay down any debt as quickly as possible. Credit cards in particular can have crippling interest rates, and the longer you take to pay them down, the more money you are paying for the “privilege” of being in debt.

What’s So Important

How Do I Prioritize?

The key to effective prioritization is to be aware of the hundreds of decisions you already make everyday without realizing it. For example, treating yourself to a meal at your favorite restaurant: a lot of people will see this as a perfectly acceptable way to reward yourself after a long week. And while there is nothing wrong with this, it’s an example of you subconsciously prioritizing your short-term comfort over your long-term financial gain. Money that could be going to your savings, emergency fund or debt is instead going towards what is essentially a luxury.

While metacognition is important to effectively prioritizing almost every aspect of our daily decision making, another option is to automate your finances so that you can spare yourself the mental effort of juggling priorities with each purchase. Nearly all bank accounts have the option to auto-pay your credit cards each month, and to deduct a portion of your paycheck each month and place it in a dedicated savings account. By removing the human factor from the equation, you will find your priorities suddenly fall into place.

How Do I Prioritize

Daniel Dewitt