Eisenhower Box: This tool can get your finances in order – here’s how

This tool is made of four quadrants and helps people prioritise tasks based on urgency and importance.

You can also use Eisenhower Box to bring your financial life to order. Let’s see how this matrix can help you plan your finances.

Quadrant I: Urgent and Important (Crisis Zone)

The first quadrant consists of things you must work on without delay. Tasks in this quadrant are both pressing and crucial. They demand immediate attention and can have significant consequences if neglected.

Here are some of the tasks that might fall in this quadrant:

Timely bill payments: Paying utility bills on time to avoid penalties. It can also include paying your credit card bills on time, as not paying on time can lead to heavy late fees and interest, adversely impacting your credit score.

Maintaining sufficient savings for automatic deductions: Ensure you have money in your savings account so that your automatic savings, such as Recurring Deposits, Systematic Investment Plans (SIPs) and EMIs, can be easily debited from your account without any issues.

Preparedness for financial emergencies: You might have to address any financial emergency, such as medical, car, or house repairs. Also, if you don’t have an emergency fund for such emergencies, you need to start building one immediately.

Tax-saving investments: We all know we must make our tax-saving investments before 31st March to save tax. However, if you tend to wait until the last minute, you might miss the window. Hence, if the deadline is approaching and you haven’t made any investments, you must do it very soon.

Adherence to tax documentation deadlines: There are deadlines for submitting your Income Tax Return (ITR) and other tax-related documents based on your profession and income. Completing the formalities within the due date is essential, so this task falls in the first quadrant.

It is important to address these tasks immediately to prevent any problems. Also, try to reflect on these tasks and how you can better manage them in the future so that you don’t have to be at that spot again.

Quadrant II: Not Urgent but Important (Planning Zone)

This is the most important quadrant. It consists of important tasks, but they are not urgent. Many individuals tend to ignore these tasks as they believe they have much time to work on them.

These tasks are foundational for financial security and growth.

Here are some tasks:

Regular savings and investments for your future goals: You might have different short-term and long-term goals, such as a vacation or children’s education, requiring adequate planning. So, it would help if you properly plan for your goals.

Retirement planning: Retirement planning is a non-negotiable financial goal. With the rise of nuclear families and lack of pension, financial planning for your retired life has become crucial.

Insurance coverage: Insurance policies can help you to take care of financial emergencies such as hospitalisation, the death of a sole earning member and loss of income due to disability. So, having the right insurance cover with adequate coverage is also important.

Regular review of your investments/insurance coverage: Investments need regular checkups as the performance of the assets in your portfolio keeps changing. Regular portfolio review helps you rebalance your portfolio back to your ideal asset allocation and weed out underperforming investment options. Your life goals might also change, and you might have to rebalance your investments or make new investments. Similarly, your insurance needs might also evolve. So, it is essential to review your investments and insurance policies regularly so you don’t have to panic at the last moment.

Financial education and learning: Your financial journey is never complete without continuous financial education and learning. Learning the basics of financial planning such as investments, insurance and debt management, is essential. This will help you to build a better financial life.

Estate planning and creating a will: You can create a will if you think you have substantial wealth and want to ensure that your heirs receive it without any issues. You can revise your will in the future as well.

Quadrant III: Urgent but Not Important (Distraction Zone)

These tasks are urgent, but they are unimportant and don’t have a long-term impact.

Tasks:

Buying items on sale: You might feel a sense of urgency to buy something on sale. However, it might not be a suitable buy. It is an urgent task with a deadline, but it is not essential to your financial journey, especially if that item is not something you genuinely need.

Redeeming credit card points: Credit card points and rewards expire. Hence, it might look like you need to redeem and use ASAP, but it is not essential from a long-term horizon.

Renewing subscriptions: You might have to cancel some subscriptions on auto-renewal mode during a specific period so that money doesn’t get debited for the next cycle. It is urgent but doesn’t have any long-term importance.

Addressing small bank errors: There might be minor errors in your bank statements or bank records. It is urgent to rectify things, but it might not be critical to your overall financial journey.

Quadrant IV: Neither Urgent nor Important (Waste Zone)

The tasks listed in the quadrant are often timewasters. They are neither urgent nor important. You can focus on the tasks in the second quadrant instead of wasting time on these tasks.

Here are some of them:

⦁ Asking your friends and family members for financial advice. They might not be the right people to guide you.

⦁ Obsessively checking the stock prices or market levels hourly or daily. If you are a long-term investor, this action might harm your finances significantly.

⦁ Listening to half-truth stories of investment gains and believe them to be true.

Conclusion

The Eisenhower Box can emerge as a powerful tool for financial planning if you have a lot of financial matters and tasks on your plate.

By categorising the tasks into the four quadrants, you can prioritise tasks accordingly. You can revisit and adjust the matrix as per your financial situation. The key is to focus on the tasks that matter to you and can lead to a better financial journey.

Padmaja Choudhury is a freelance financial content writer. With around six years of total experience, mutual funds and personal finance are her focus areas.

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Updated: 20 Oct 2023, 09:08 AM IST