Financial Order of Operations: How to Prioritize Spending

If you are having trouble with managing your day to day finances, using a personal finance flowchart will help get you back on track.

Knowing the steps of how to manage your finances will help keep your money affairs organized.

You can prioritize your spending by following a financial order of operations because it lays out a process for keeping your finances organized.  Using a personal finance flowchart acts as a personal finance roadmap because it lays out the actions and direction you must follow in order to stay organized with personal finance and household money management.

If you struggle with prioritizing your spending, be sure to use this personal finance flowchart system below to guide you through the process of prioritizing your spending. If you are repairing your credit yourself, you will need to use a personal financial flowchart.

Best Ways to Prioritize Spending with Financial Order of Operations

A lot of people struggle with making financial decisions in life when it comes to their finances.  It’s very common.

However, using a personal finance flowchart can guide a person on making the right financial decisions at the right time.  Financial independence flowcharts can help you achieve financial freedom and financial independence.

Financial flowcharts are great tools to not only teach teens about financial responsibilities, but also for assisting with saving priorities.

The personal finance flowchart below walks you through the steps necessary to prioritize your spending.

If you are learning about personal finance and how to save money as a high school student, using a personal finance flowchart makes sense.

You can use this personal finance flowchart template to help guide your decisions while prioritizing your spending initiatives.

prioritize your spending personal finance flowchart

Determine Your Monthly Budget

The first and most important step in prioritizing your spending is determining your monthly budget.  In order to do that, you need to create your own monthly budget for yourself.

Figuring out your monthly income and expenses is necessary so you know where you stand financially.  It’s considered the first step in the personal finance flowchart for prioritizing your spending.

You’ll have to figure out your monthly income for example $40,000 a year is how much an hour and then convert it to monthly income. You should use a spreadsheet to document your monthly income and expenses.

Figuring out which personal budget method to follow will help dictate how to set up your spreadsheet.

Additionally, when creating your budget, be sure to list your expenses as fixed and non-fixed expenses.

The goal of this step is to end with a surplus.  If you are unable to do this, keep going through your budget and make adjustments.

You will have to either reduce your current expenses or increase your monthly income.

Those are the two actions that you have to take in order to yield a monthly surplus.

Build an Emergency Fund

Building an emergency fund is considered a foundational step for prioritizing your spending.  Figuring out how much to save for your emergency fund is based off of your monthly financial expenses.

This can be tricky sometimes because you might have a budget based off of irregular income and therefore you will have to use an average for your monthly totals.

Additionally, budgeting tips and tricks can also help with customizing your monthly budget.

Whatever your monthly budget totals for expenses work out to be, most experts agree that having an emergency fund of 6 months is average.

However, given the current economic recession that is looming, having a reserve emergency fund of 12 months would also be a great option.

To build your emergency reserve fund, dedicate all of your surplus at the end of each month into a separate savings account. This is noted in the personal finance flowchart as step 2.

Having an available reserve fund to handle emergencies is important because you never know when you might suffer medical issues, lose employment, or suffer other financial losses.

Stable and reliable emergency funds can get you over these financial tragedies without much stress.

Pay Down High-Interest Debt

In this personal finance flowchart step, you will focus on paying down debt.

There are a lot of great methods to get out of debt fast that are easy to complete.

A good strategy to follow is the debt snowball method which will help you determine what debt to pay down first.

In order to use the debt snowball method, you first have to write down all of your debt.

Create a spreadsheet and list all of your debt payments that you have each month.  You should include auto loans, student loans, credit card loans, and personal loans.

For each loan write down the following on a spreadsheet:

  • Balance Due
  • Monthly Payment Amount
  • Interest Rate

By using a spreadsheet, you can use the sort function and sort the results by balance, rate, or payment amount.

This will help you determine where to focus your surplus money.

If you you are interested on paying off the smallest balance, dedicate your surplus money to that.

Once that debt has been paid in full, you will have a bigger monthly surplus available and you can tackle higher interest debt.

Something to point out regarding personal finance flowcharts is that you may see some recommend contributing towards retirement at this stage as part of their household budget strategy process.

I don’t.

The reason I don’t is because your money has greater “purchasing power” paying down debt that has an interest rate of 20% or greater as is common with credit card debt.

Now you could take some of that money and invest it into a retirement account, but remember the historical average rate of return for the stock market is only 8%, and that’s not a guarantee.

You could actually lose money in the short-term if the market falls which has been the case during recessions.

Paying off debt at 20% or more is a much better return on that money in the short term than MAYBE an 8% stock market return.

Saving for Retirement

Once you have satisfied all of your high-interest debt, you should have a very decent monthly surplus available to you going forward.  You will no longer have all of those minimum debt payments each month for your loans.

The next step on the personal finance flowchart is to save for retirement.

If you work for an employer who offers a monthly retirement plan with a match, you want to be sure to contribute to that.  Just contribute the monthly minimum right now.

Later on in the personal finance flowchart, you can increase your retirement savings should you decide to do so.

If you are self-employed and do not have access to an employer retirement plan, you will have to set up a ROTH IRA.

Determine an appropriate amount to contribute for retirement.

  • Most employer-based retirement plans must contribute 4% of an employee’s salary by law.   I would recommend contributing at least that amount as an minimum.

You can go higher if you want and make 5% your minimum.

If you are closer to retirement age and only have 10 years or less to save, you may want to start off saving for retirement with a 10% minimum amount as well.

Determine Financial Goals

At this stage of the flowchart, you will have to make some serious life choices and decisions regarding the future of your life.  This is where you will come up with some financial goals.

These goals will be different for everyone but the underlying theme for all of them is prioritizing your spending.

Step 5 of the personal finance flowchart references some of these personal finance flowchart examples and financial goals.


I mentioned above to contribute a nominal amount towards retirement savings. If this is an important goal for you and you want to retire early, your financial goal would be to max out your retirement.

By contributing more towards savings, you have a bigger pot of money that will grow over time.

Saving for a House Down Payment

If you are just starting out in life and looking for your first house to buy, saving money for a house down payment towards your first house would be a financial goal for you.

You would want to dedicate some of your surplus money towards a savings account for this purpose.

If you have a low credit score, there are many ways how to improve your credit score that you can undertake while saving for a down payment.

Saving for a Family Vacation

A lot of families take vacations each year.  If you have a family of 4, there is no question that your annual vacations can easily rack up cost to them.

It’s not uncommon for families to splurge over $4,500 according to this Forbes article on summer vacation costs.

By following the personal finance flowchart and prioritizing your spending, you will be able to save for this annual expense each year.

Save for College

Saving for college for children is another personal finance flowchart example that is referenced in step 5.

Prioritizing your spending by funding a college savings plan is a great option to undertake especially if your children are still in elementary school.

There are many 529 plans out there that offer great choices and options.

By spending money today on college savings, you are lessening the amount of money needed for college costs in the future.

The best part of this is if you start saving for college early, your children may not fall subject to student loans by the time they are college bound.

Wealth Building Strategies

The final stage of the personal finance flowchart is to prioritize your spending for wealth building strategies.

By knowing how to build wealth from nothing, you can attain financial independence.

There are a lot of personal finance flowchart examples in step 6 that you can choose from to prioritize your spending.

By prioritizing your spending, you can choose how and in what combination you want to achieve financial independence.

Diversify Income & Invest in Stocks

One way to prioritize your spending is to invest in the stock market.  You can create a solid investment portfolio just with dividend investing alone.

A lot of people who have attained FIRE (financial independence & retire early), have done so with dividend investment portfolios.

The thought here is that by reinvesting the dividends into more shares, your portfolio is always growing.  At some point, you can redirect those dividends as routine income to cover everyday living expenses.

Another great advantage of dividend income is that it isn’t taxed at the full income tax rates.

Start a Business

Another personal finance flowchart example is to start a business or buy an existing one.  The best types of businesses to own are the ones that produce residual income.

By prioritizing your spending towards either creating or starting a business, you can build wealth with this strategy and increase your overall net worth.

Home-based businesses are great examples for this because they often have little to no start up costs and are also low-risk.

Things such as blogging or selling used appliances to people who buy used appliances near you are great businesses to start.

Here is a step by step guide on how to start a blog complete with pictures for beginners that can be started for less than $75 a year!

Diversify Income & Invest in Real Estate

Step 6 can also be thought of as a financial independence flowchart because it gives such great options for spending priorities that relate to financial independence.

Creating income through real estate investing is also a great option to achieve financial freedom.

There are several ways that you can invest in real estate.

One low stress way is to invest in real estate crowdfunding companies that handle the heavy lifting of real estate investments.

The other option is to invest in SFR and MFR units and rent them out yourself to tenants.

With the current housing inventory so limited, there is a huge demand for rentals.

Additionally, you can also become a section 8 landlord and receive rental income that is heavily subsidized by Uncle Sam!

Financial Independence Order of Operations: Stay on Track with Prioritized Spending

By using a personal finance flowchart, you can easily prioritize your spending, budget by paycheck, and stay on track.

Determining your monthly income and creating a budget is a foundational step.  Increasing your income and reducing expenses is needed to create a monthly surplus. It will also help you live below your means in life.

The personal finance flowchart focuses on paying off high-interest debt through methods such as the debt snowball method.

Focusing on saving for retirement, along with other budgetary guidelines and personal financial goals, can help guide your spending priorities.

Once you have those established, you can use this personal finance flowchart as a financial independence flowchart as well.

By focusing on wealth building strategies, you can prioritize your spending to achieve financial independence.

Once you start using a personal finance chart, you will see how easy it is to prioritize how your money is spent.  When you start using a personal finance flowchart, you will have no problems staying on track for prioritized spending and achieving financial independence.

BG Vance

After starting over financially in mid-life, I decided to share my experience and financial lessons learned with others. I have over two decades worth of professional and personal financial experience helping individuals and families in all stages of life realize their financial dreams. More about me...

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