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Wednesday, February 28, 2024

How to Make Better Financial Decisions

Making good financial decisions is critical for achieving financial security and reaching important goals like buying a home, paying for education, or having a comfortable retirement. However, juggling multiple financial priorities can be overwhelming. Should you save for goals simultaneously or focus on one goal at a time? Here’s guidance on smart strategies for managing personal finances.

Choosing Between Sequential and Simultaneous Financial Goals

When it comes to saving and budgeting for major financial goals, you basically have two options:

Simultaneous Goal Setting

Save for two or more goals at the same time by allocating a portion of income to each goal.

Sequential Goal Setting

Save for one goal at a time, checking them off your list in a series of steps before moving to the next goal.

Each approach has advantages and disadvantages to weigh.

Benefits of Setting Sequential Financial Goals

Saving for one goal at a time makes it simpler to set up a budget, open saving accounts, and track progress. Achieving each milestone also gives a strong sense of accomplishment.


  • Easier to manage savings for a single goal
  • Provides sense of completion as each goal is funded
  • Can focus intensely on high-priority goal

Drawbacks of Sequential Goal Setting

While sequential goal setting seems straightforward, it has significant downsides:


  • Delays compound growth by postponing retirement & long-term savings
  • Goals get funded later due to having to wait your turn
  • Retroactive compound interest doesn’t apply to deferred goals

Advantages of Simultaneous Financial Goals

Though more complex, saving for multiple goals at once optimizes compound interest growth which is extremely powerful over long time horizons.


  • Maximizes compound interest growth
  • Avoids postponing retirement & long-term savings
  • Makes the most of early saving years

Challenges of Concurrent Goal Setting

Pursuing too many goals at one time can be complicated and slow overall progress. It takes discipline to earmark funds appropriately and not raid one goal’s money for another pressing need.


  • More complex to set up and manage
  • Can be demotivating as goals take longer
  • Requires diligence to compartmentalize accounts

The best approach depends on your priorities and personal finances. Most experts suggest focusing first on near-term goals before shifting to longer-term goals like retirement.

Research on How Young Adults Set Financial Goals

Balancing multiple financial goals is especially challenging for young adults, typically defined as those under 40. What priorities do younger generations set when deciding how to allocate limited funds?

Key Findings on Millennials’ Financial Decisions

A 2022 study published in the Personal Finance Journal examined financial goal setting among 1,538 young adults. Key findings included:

  • 69% of respondents were under age 45
  • Top goals were saving, buying necessities, and paying down debt
  • 32% still had outstanding student loans
  • 75% said student debt impacted housing & retirement choices

Many respondents expressed reluctance to save for some goals until others were funded first. Common phrases were “after I…”, “as soon as I…”, and “once I…” when discussing long-term goals like retirement and home buying.

This indicates sequential goal setting is prevalent, with many young adults prioritizing debt repayment and short-term savings over long-term investments.

5 Ways to Make Better Financial Decisions

How can the average person make smarter money choices? Here are five research-backed tips:

1. Consider Concurrent Financial Planning

Rather than completing goals sequentially, simultaneous goal setting utilizes compound growth more effectively. Even small retirement contributions in early career years can grow exponentially over time.

2. Increase Positive Financial Behaviors

Amp up whatever helpful money habits you already have – save a little more each month, reduce unnecessary expenses, or automate transfers to investment accounts. Developing good financial habits is crucial.

3. Reduce Negative Financial Habits

Cut back financial habits that undermine your goals – overspending on dining out or impulse purchases for example. Every dollar saved helps reach goals faster.

4. Start Saving for Retirement Now

Nearly 40% of young adults save nothing for retirement. But getting at least some money invested as early as possible is vital – thanks again to compound returns. Start with whatever you can afford.

5. Use Goal Calculators to Make a Plan

Financial goal calculators help determine target amounts to save and timelines for achieving objectives. Creating a realistic plan boosts motivation and a sense of control. Helpful calculators are available from FINRA and Practical Money Skills.

The bottom line? Take positive steps daily, however small, to get your finances on track. Consistency matters more than perfection when building financial security.

Weighing Sequential vs. Simultaneous Goal Setting

When deciding how to allocate limited funds across multiple financial goals, should you go full speed ahead on one objective at a time or split efforts across goals simultaneously? There are reasonable arguments on both sides.

Key Considerations for Sequential Goal Setting

Saving for one milestone at a time could make sense if:

  • Paying off high-interest debt before it compounds is a priority
  • You need short-term savings for an emergency or major purchase soon
  • Focusing intensely on one goal keeps you motivated
  • Simplicity is important as you are new to budgeting

Key Factors Supporting Concurrent Goal Setting

Pursuing multiple objectives at once may be preferred if:

  • Maximizing retirement contributions early in your career is crucial
  • You are comfortable managing accounts for separate goals
  • You have an established emergency fund
  • You have above-average financial knowledge & discipline

Most experts suggest a combined approach, focusing first on any pressing high-interest debt, then building up emergency and short-term savings. Once those foundations are in place, shift to simultaneously saving for mid-range priorities like a home down payment plus long-term goals like retirement.

The right system depends significantly on your personal financial situation and level of money management skills. Be honest about which approach you are most likely to sustain over the long run.

Tips to Improve Financial Decisions No Matter Your Approach

While the simultaneous vs. sequential decision is an important one, there are several overarching financial best practices that apply in either scenario.

Automate Regular Transfers to Investment Accounts

Manually moving money into savings and investment accounts is challenging. Automated monthly transfers into the right accounts removes emotion and ensures disciplined saving.

Access Workplace Retirement Accounts

If your employer offers matching retirement contributions as part of a 401k or 403b program, take full advantage up to the match limit. This equals free money for retirement.

Build Up Emergency Savings

Having liquid savings to cover at least 3-6 months of living expenses protects against needing high-cost debt during illness, job changes, or other crises.

Keep Retirement & Other Goals in Separate Buckets

Whether using sequential or simultaneous methods, have distinct accounts with clear purposes. This prevents “borrowing” from long-term savings to fund short-term needs.

Review Progress Frequently & Adjust Plans if Needed

Revisit your budget and investment account balances at least quarterly. Celebrate wins to stay motivated. If progress stalls, consider financial advice to troubleshoot your approach.

Having a thoughtful financial strategy with ingrained money management habits offers the best chance for funding critical goals on time.

Frequently Asked Questions – FAQs

What is the difference between sequential and simultaneous financial goal setting?

Sequential goal setting tackles one goal at a time, while simultaneous involves saving for multiple goals concurrently.

How does compound interest impact sequential goal setting?

Compound interest is deferred in sequential goal setting, potentially leading to missed growth opportunities.

What are the key considerations for choosing sequential goal setting?

Consider sequential goals if simplicity, short-term needs, or intense focus on one goal is a priority.

How do young adults prioritize financial goals according to research?

Research shows young adults often prioritize debt repayment and short-term savings before long-term investments.

Should I focus on one financial goal or multiple goals simultaneously?

It depends on factors like financial knowledge, discipline, and personal preferences. A combined approach is often recommended.

What are some overarching financial best practices regardless of goal-setting approach?

Best practices include automated transfers, utilizing workplace retirement accounts, building emergency savings, and reviewing progress frequently.


Making smart financial decisions is crucial yet confusing when juggling multiple goals like debt repayment, emergency savings, homebuying, and retirement. Should these be addressed sequentially or simultaneously?

For most folks, a blended roadmap focusing first on urgent needs like high-interest debt and basic emergency savings, then adding retirement and intermediate goals makes the most sense. Just be sure to revisit plans frequently and course correct if needed. Consistently saving something, no matter the amount some is better than nothing.

The right savings system depends significantly on your financial sophistication and personal preferences around simplicity. Seek input from financial advisors if you feel overwhelmed. WithResearch shows financial goal calculators also boost motivation and accountability.

Small positive steps today like saving a few extra dollars each month, limiting impulse purchases, or automating transfers to investment accounts give savings and earnings potential years to compound.

Every dollar counts when striving for major financial goals, especially earlier in your earning years. Commit to incremental progress and your future self with thank you down the road.


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