I believe it was Steven Covey who I first learned this from.
The concept is this: if you’re trying to fit a pile of rocks, pebbles, and sand into a mason jar, you first have to start with the rocks. Afterwards, pour in the pebbles and then the sand, as they will find their way through the remaining spaces.
However, if you reverse the order and start with the sand and pebbles, the rocks won’t fit.
This concept is mostly tied to time management and setting priorities in life, but I like to view finances through a similar lens.
We all have the big Rocks. These are our financial goals: generosity, retirement, kids savings goals, house purchase down payments, debt elimination, etc.
Then we have Pebbles. These are things we pretty much need, but aren’t really goals: our mortgage or rent, internet and other utilities, extra clothing budget, eating out.
And then we have the Sand. The extra things that we don’t really need, per say, but enjoy. Eating out, the infamous lattes, Netflix, and so forth.
When we create financial plans – we need to start with the Rocks. Identify just how big they are (which will vary for each of us) and put them into our jar (budget/cash-flow plan) first. If we don’t, we run the chances that they won’t fit in after we fill up the jar with Pebbles and Sand first.
I’m not a believer that you have to remove (or even track) all the Sand items from your life – go ahead and enjoy that latte without guilt. But first make sure the big Rocks are funded each month, followed by the Pebbles, and then the sand.
Personally, I nerd out over the Sand with our personal budget. I track every penny. But not everyone does – and that’s fine. So what I encourage folks to do at the minimum is identify and measure the Rocks, and at the least budget for them each month. Then allow the Pebbles and Sand to trickle into their own places.