Covey’s Matrix to Personal Finance


In a nutshell, hedge against emergencies, resist cravings, drop the unnecessary expenses and focus on what really matters.

Have you ever felt torn when it comes to which expenses should be prioritized? How about deferring preparation for something even though you know it is important? Or have you spent on something that either fulfills a temporary urge or does not provide value at all?

To better address these familiar scenarios, one way to approach this issue is to use the time management quadrant of Stephen Covey. Covey’s matrix provides a framework in which we can categorize our expenses based on urgency and importance.

High importance, high urgency (HI-HU)

In personal finance, these are the events that must be addressed immediately. Usually, events of high importance and urgency are emergencies with significant financial impact. Examples of such are hospitalization, house and car repairs, loss of income due to job redundancy and/or retrenchment or other medical concerns such as death, disability, etc.

The two common ways to deal with these issues are through use of emergency funds and/or insurance so it is essential that the level of emergency funds is commensurate with the needs of the family (on average around 6-months’ worth of expenses this time of pandemic) and that the household has sufficient insurance coverage (complementary to any employment benefits).

Low importance, high urgency (LI-HU)

In other words, cravings. These are usually impulses to buy something (usually of small value) when there is really no need for such item now, or perhaps in the future. Cravings have been more tempting and easier to satisfy especially now that things can be bought online and sometimes via credit.

To manage cravings, always defer buying something that is not planned as this urge to buy usually goes away after few days or so. It is also suggested to decrease usage of online shopping apps and to buy things in cash if buying on credit results to uncontrolled spending.

This is not to say that buying to satisfy your wants is inherently bad but, rather, it should be planned properly. It’s recommended that one sets aside a small amount each payday for such purchases.

In a way, this guilt-free fund can be spent in any way chosen. Just remember that before allocation of financial resources to this fund, all other financial responsibilities should be addressed first.

Low importance, low urgency (LI-LU)

Things or purchases under this category are not aligned with the household’s goals or priorities. Cash resources allocated for this category are basically wasted as it does not fulfill immediate need for the household nor provide any long-term fulfillment.

In many cases, these purchases are usually small items that can be result of aimless spending and a household which has a poorly developed financial plan. In order to minimize expenditures under this category, a household should have a solid financial plan anchored on what really matters to the members of the household.

Having a well-monitored cash flow statement and planned budget will also provide household with additional benchmarks to ensure that whatever financial resources they have are put into good use.

High importance, low urgency (HI-LU)

One can think of the expenditures under this category as the true financial goals of the household. Having a thorough understanding of what is important for the household will lead to development of financial plans centered on these goals.

Take retirement for example. It is undeniably essential for any person to prepare for retirement and with this level of importance, a longer time horizon allows an individual to have more time preparing for it. Having a working financial plan as early as possible provides an individual or a household ample time to prepare for things that they need and want to achieve.

The critical thing to remember here is that the individual or a household should know what really matters for them. An honest evaluation centered in knowing what will provide fulfillment will set the goals from which a financial plan can be created.

Another reminder to bear in mind is that the low urgency of these important goals sometimes becomes a pitfall and reason for us to procrastinate until such time that we lost the momentum and leverage of time.

Citing retirement as example again, we have read stories or know of people that put off retirement preparation until it is too late, forcing them to live in conditions different from what they could have had and sometimes working far longer than they really like to.

In a nutshell, hedge against emergencies, resist cravings, drop the unnecessary expenses and focus on what really matters. It is easier said than done but let us all work together to have a good start for 2021.

John Hero Salvador is a Registered Financial Planner. He has a holistic exposure and well-rounded development on procurement and supply management.


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