How to Decide Between Major Financial Goals

I have a friend (let’s call him Steve) that is trying to his best to be an adult. Steve is paying off students loans, saving up for a house, and planning a vacation. It’s quite a full plate.

Steve asked me the other day, “How can I make all three work at the same time? Pay off debt, save, and enjoy life?”

The truth is there is no magic formula. As adults, sometimes we have to make decisions where there is a loser. But I have an exercise that can help you make that choice.

When The Flintstones Got Weird

Did you ever watch The Flintstones cartoon? There was an episode where Fred and Barney had to be in two places at once.

Fred and Barney agreed to take their wives on a date in a couple days, but they also wanted to go bowling. So their alien friend, Gazoo (the show got weird towards the end), made Fred and Barney clones. The guys went bowling and the clones went on the date.

And guess what? Eventually, something goes wrong–of course–and the girls figure out what’s going on. They would fight, talk it out, and soon all was well with their prehistoric world. Yabba dabba doo!

I wish I could coach my clients to pull off Flintstones-level stunts. But the real world doesn’t work that way. We find happiness in different ways, but our money–like time–eventually runs out.

What should Steve, my friend, do? How do you pick which goals you want to work on first? What is the most responsible choice?

An Exercise You Can Try

I can’t teach you my whole coaching process in one article. Instead, here is a quick exercise you can learn to help pick the right goals for you.

The main idea is to avoid the paradox of choice. We love to have a lot of choices so we can pick what’s best for us. Bigger menus! Streaming music! Custom shoes!

The problem is when there are too many choices or there is too much information, we end up picking nothing. How many times have you scrolled through Netflix only to watch nothing at all?

I told Steve to pick two of his goals to compare. He picked student loans and saving up for a house. Steve wants to buy a house in a year.

I asked Steve, “Assume you still pay the minimum payments on your loans. Can you save enough of a down payment in a year for the house you want?” He said yes.

I then asked, “Could you pay off all your student loans in a year without saving any money towards a house?” He said yes.

Fantastic! Steve could reach either of his goals in a year. Then I said, “Imagine yourself in a year. Option A: Living in an apartment debt free. Option B: A house you love with a mortgage and student loans. Which makes you feel better?”

I won’t tell you what Steve’s answer was, but I bet you made a choice. Imagining yourself in those two situations helps you–and Steve–find out what’s important to you. You start to understand what you want more.

My advice in this situation is to get rid of the debt first. But what about vacation? How does that fit into this situation?

Caution Going Forward

You can repeat the exercise and compare saving for a vacation to getting out of debt. Or compare saving for vacation versus a down payment. At some point, you have to give up something that is less important to get something that is more important. I left Steve to choose on his own.

There is likely a middle ground where you can work on all your goals at the same time. Yet, you can start to feel like you’re taking small steps in many directions. Some people feel frustrated when they don’t make meaningful progress towards anything.

Some people are okay with that. Some people aren’t. It’s up to you. The best choice for you might be to pick one goal and go after it with passion and intensity.

This exercise helps you narrow the infinite universe down to a couple options. By doing so, you can block out the noise and avoid the paradox of choice. It works for picking financial goals or buying sunglasses.