In pursuit of financial independence and personal fulfillment

The highly effective money management matrix

For almost three decades, top performers have used the time-management matrix Stephen R. Covey introduced in “The 7 Habits of Highly Effective People” to maximize the time spent on meaningful work and minimize the time spent on distractions. It is among the book’s most memorable and effective tools.

What if we apply the same concept to personal finance?

The original ‘Highly Effective’ time-management matrix

The time management matrix splits tasks into four quadrants, based on their urgency and importance.

Quadrant 1: Things that are important and require immediate action. These should not be put off.

Quadrant 2: Things that are important but not urgent; they are long-term in nature. This is the strategic planning box, containing items that should be evaluated carefully over time and implemented for future success.

Quadrant 3: Things that have an element of immediacy but ultimately are not important. These activities should be minimized or eliminated.

Quadrant 4: Things that have no urgency or importance. Again, these activities should be minimized or eliminated.

Covey says we should spend as much time as possible in quadrant 2. Quality time spent on long-range, important elements will have the side benefit of also reducing quadrant 1 activities, though it won’t eliminate them entirely.

Applying the concept to finance

Now let’s replace the time-management elements with money-management elements.

Just like in Covey’s matrix, the goal is to spend as much time in quadrant 2 as possible, while quickly addressing the items in quadrant 1. You should simultaneously minimize or eliminate the activities in quadrants 3 and 4.

What are some of the activities in each quadrant?

Quadrant 1 

Remember, these are things that are important and require immediate action. They should not be put off. Examples of quadrant 1 activities are:

  • Paying down credit card debt
  • Paying bills on or before the due date
  • Reducing monthly recurring bills
  • Building an emergency fund
  • Canceling unused subscription services
  • Allocating windfalls wisely
  • Requesting multiple offers for home or auto repairs
  • Understanding the current real estate market during a home purchase
  • Reading and understanding legal agreements you’re signing
  • Maintaining your long-term investment strategy
  • Filing taxes on time
  • Keeping lifestyle inflation in check
  • Prioritizing generic over name brands
  • Finding coupons or discount codes for purchases you’re already making
  • Educating yourself about personal finance topics when they come up
  • Increasing income through your job, business and/or side hustles

All of these activities are about removing debt, reducing expenses, maintaining good credit, and generally making smart decisions about your money based on the results of the work done in quadrant 2. Education straddles quadrants 1 and 2, but is critical when an urgent issue comes up. Never make a financial decision with long-term consequences without doing your homework.

Quadrant 2

Again, these are things that are important but are long-term in nature. This is the strategic planning box, containing items that should be evaluated carefully, implemented over time and reviewed/revised for future success. Examples of quadrant 2 activities include:

  • Setting goals for the near, medium and long term
  • Shopping for better insurance rates
  • Budgeting, especially into the future
  • Writing a will or trust
  • Reconciling checking/savings accounts
  • Tracking and reviewing expenses
  • Rebalancing your portfolio
  • Adjusting your asset allocation based on your goals
  • Tracking your net worth
  • Reviewing investment fees
  • Optimizing investments and expenses for tax purposes
  • Saving for a new (used) car
  • Putting time between wanting something and purchasing it
  • Searching for deals on planned purchases
  • Minimizing wants
  • Giving back to your community
  • Optimizing credit card cash back or points strategies
  • Saving for retirement
  • Calculating how much is needed for retirement
  • Checking your credit report
  • Following the mantra to reduce, reuse, recycle
  • Understanding total cost of ownership for major purchases
  • Learning about general personal finance topics throughout the year
  • Automating savings
  • Planning vacations and social outings to minimize expense

Some of these activities stray into quadrant 1. For example, shopping for better insurance rates becomes an urgent matter at policy renewal time, but being aware of the necessity of the activity and researching what you should do to reduce your rates are quadrant 2 behaviors.

By taking the time to learn about these personal finance topics, you can make better long-term decisions and guide your financial life in a direction to achieve your goals. Most of these will be different for each of us depending on our unique circumstances. However, the principles learned through education will make it easier to reach those decisions.

By being deliberate in quadrant 2, you will minimize time spent on quadrant 1 activities because you will avoid debt and know where every dollar should be allocated to meet your goals.

Quadrant 3

These things have a sense of immediacy but ultimately are not important. These are activities or situations that should be minimized or eliminated.

  • Buying items you don’t need because they are on sale
  • Making large, spur-of-the-moment purchases
  • Spending an excessive amount on restaurants
  • Getting the latest expensive cell phone to replace your still perfectly functioning model
  • Paying a premium for last-minute travel
  • Making investment moves based on daily market performance
  • Falling for multi-level marketing pitches
  • Going out for frequent, expensive social gatherings
  • Paying bank or ATM fees
  • Borrowing money from relatives
  • Taking out payday or title loans
  • Buying “hot” stocks you haven’t researched fully
  • Purchasing extended warranties
  • Evaluating purchases based solely on sticker price

These activities mostly fall in the “gotta have it” category. You are more prone to impulsive, suboptimal money decisions when you haven’t spent enough time in quadrant 2 identifying goals and making plans.

Of course, there are times when some of these activities are understandable. It’s not a total prohibition for everyone at every time. However, the goal is to minimize these as much as possible.

Quadrant 4

Things that have no urgency or importance. This is where people can really get into trouble. These activities include:

  • Spending money repeatedly on frivolous items that don’t bring you joy (ex. – “the latte factor”)
  • Paying a premium for status symbols
  • Leasing cars or buying new cars before your current one has problems
  • Prioritizing name brands over generics
  • Gambling
  • Shopping out of boredom
  • Opening retail credit cards
  • Engaging in extreme couponing
  • Buying boats, RVs, motorcycles, etc. when you only use them a few times a year
  • Signing up for free trials that become paid services at the end of the trial
  • Replacing used, but otherwise functioning items
  • Basing your decisions on anything other than your goals and values

Most of these activities are either meant to “keep up with the Joneses” or are mindless wastes of money that are completely avoidable.

Again, weigh these against your own circumstances. If your family lives for the RV lifestyle and traveling the country in an RV is one of your long-term goals, by all means buy yourself an RV. But if you’ve got an RV sitting in the driveway that you’ve only used four times in three years, you’ve made a horrible financial decision.

Why is extreme couponing on this list? Because it requires spending enough hours to constitute a part-time job to save less money than that part-time job would likely pay. Understand that your time is worth something. If you can earn more money doing something else in the same amount of time, you’re drifting toward passion projects. If you’re passionate about clipping coupons it better be about a deep-seated love of scissors and not a false assumption about savings.

Quadrant 4 activities are a financial death by a thousand cuts. It’s the accumulation of seemingly small decisions that add up to a hole large enough to sink your long-term goals. While you may not be able to identify some of these habits off the top of your head, an honest look at your expenses for the past six to 12 months should surface problem areas.

How to improve your own finances

These are not exhaustive lists, but they are instructive about the kinds of activities you’ll find in each category. If you’re struggling to get traction financially, or aren’t sure what to do next, this matrix gives you a guide for moving in the right direction.

The first thing to remember is not to beat yourself up about it. Knowledge is power, and knowing that there are areas where you can improve means you have the power to make changes.

Start by honestly evaluating your quadrant 3 and 4 habits and expenses. Pick a couple of quick-win items that you can eliminate without pain and zero in on the one item that is most troublesome for you. That’s your stretch goal; you want to work toward eventually cutting that way back or eliminating it entirely.

Next, go down the list in quadrant 1 and determine where you stand on each of those activities. Again, pick a couple of quick-win items. I highly suggest writing down all your monthly recurring expenses first and seeing which ones you can reduce. In fact, you can cross into quadrant 2 by getting quotes for auto insurance right away to make sure you’re getting the best rate. I’ve saved hundreds of dollars a year by getting new quotes online every 24 months.

If you have credit card debt, use every dollar of savings you squeeze out of these improvements to slash that debt. Be ruthless.

Finally, pick some quadrant 2 items that interest you and start researching them. Write down several questions you have about the topic before you even start looking into it. Then gather information from several sources to answer those questions and write down what you’ve learned. What new questions did you have once you started your research? Write them down and repeat.

Once you see how easy it can be to learn about one or two aspects of personal finance, the rest becomes a matter of finding the right material. There has never been more personal finance information freely available than there is right now.

Follow these steps and you, too, will be a highly effective money manager.

What are some other activities that should be in each quadrant? Tell me in the comments.


  1. lisa

    I like the time management matrix. It’s so on point and looking at it, there were things that made me say,”oh, yeah! I should do that!” I think it’s very relevant to everyone who wants to alleviate financial stress, prioritize FIRE and most importantly, prioritize life issues (like living wills/wills, paying bills on time so late fees aren’t charged, etc…)

  2. Angela @ Tread Lightly Retire Early

    Financial death by a thousand cuts is right. They don’t seem to be huge numbers until you start deleting them from your budget 😉

  3. Lanny

    Love the Money Management matrix. Can’t wait to share it to others. Thank you.

  4. Colver Long

    Love this! Thank you for sharing!

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