The Household Budget Prioritization Method

Prioritization is the #1 thing that leaders struggle with. Prioritization can then be considered the top priority for leaders.

But wait, managing budgets, hiring and maintaining a top-notch team can’t be less important than prioritization!

This is true, however all leaders find a way to manage budgets and hire teams. And in some way, all leaders prioritize. But do they follow a specific, repeatable, transparent process? Generally not.

And part of the challenge is that the prevailing wisdom on prioritization is simplistic and wrong.

When leaders receive guidance on how to prioritize, they often get the well-meaning advice, “Write everything down and put it in a single-file, stack-ranked order from 1 to 50.”

This is simple advice to say, and hard advice to follow. Because the advice is so simple, it is easy to find flaws in it and then reject the notion of prioritization completely. When this happens, leaders fall back on an intuitive and unstructured method of prioritization that lacks transparency and accountability.

Every leader has certain initiatives or responsibilities that can’t reasonably be put in a single 1 to 50 list of priority. Every leader has a group of items that are mandatory. And when well-meaning coaches and consultants ask them to prioritize between these items it is like they’re asking someone if they had to choose, which is more important, the ability to breathe or that our heart keeps beating? Clearly both of those are required and it would be illogical and wasteful in all but the rarest of circumstances to spend time deciding which is more important.

Instead, organizing the initiatives and responsibilities into groups first, enables prioritization discussions on each of the groups.

Power, Cell Phone, Netflix

Imagine your monthly personal or household expenses. If someone asked you to put them in priority order from 1-50 you would find that very challenging, but it wouldn’t be hard to get started.

You would likely be able to identify expenses that are truly discretionary fairly easily (I counted at least 5 different streaming video services I’m currently paying for). These are the type of expenses you could cut and it might be days, weeks, or months before anyone in the household noticed.

You would also likely be able to easily identify the expenses that are non-discretionary. These consist of what you pay to have a safe place to live and sleep. Expenses in this category would include mortgage/rent, electricity, water, gas, etc. These are things without which you do not have a safe place to live and sleep. The moment these services or benefits are removed, everyone in the house would immediately notice.

You would likely find it challenging to put many items into the middle category. These are the items that feel non-discretionary but really aren’t. More on this below.

These categories can be thought of as:

  • Non-discretionary / Power, water, mortgage, rent, etc.
  • Painful-discretionary / Cell phone, internet, etc.
  • Obvious-discretionary / Streaming services, food delivery, lawn services, etc.

These 3 categories contain distinctly different types of items and therefore the approach you would take to prioritize would necessarily be different.

Within the obvious-discretionary/Netflix category you could evaluate each streaming service based on how frequently you use them, their cost, and the amount of enjoyment each provides you. There are multiple dimensions to consider which could inform prioritization. It would not be too challenging to compare items in this category and decide which to cut.

If you asked the same questions of the expenses/services in the non-discretionary category, you’d find that you use all of them all of the time. You’d find that your level of enjoyment can be evaluated on a binary scale: if you have them, you enjoy them. If you don’t have them, your ability to have a safe place to live and sleep is compromised.

Cost becomes the primary way to think of the items in this category. Any ‘prioritization’ that occurs within this category is around reducing the cost of individual items, rather than identifying items to remove/de-prioritize. The question of, “Are we paying too much?” is a great question to ask. That question allows you to manage expenses. But this is a very different question from, “If you could only pay one of these expenses, which one would it be?”

Once you get to the non-discretionary expenses, you can’t debate the priority of an individual expense anymore. This is because at this level the expenses form the system that allows you to have a safe place to live and sleep. And you can’t decide to remove one part of a system without affecting the whole.

An example of how to think about the non-discretionary items within a system (created by Russell Ackoff) is to think of an automobile. An automobile has tires, an engine, a steering wheel and many other components. These components interact to form a system that allows you as the user to travel from one place to another. If you take away any essential parts of this system (removing the wheels, disabling the engine, or taking away the steering wheel) then then automobile ceases to function as an automobile.

It is the same with your non-discretionary household expenses. Each must be in place for the system that is your home to be functional.

The Missing Middle – The Painful-Discretionary

So, you’ve identified your non-discretionary items and your obvious-discretionary items. This means you’re done, right?

Odds are at least 50% of your expenses don’t fit cleanly into either category. This middle category is where prioritization is critical.

For your household expenses, this middle category contains your cell phone and internet service.

You may feel that these are non-discretionary because you use them all the time and they (usually) enhance your quality of life. But they aren’t required. If you’ve ever been to a remote location on vacation, you likely didn’t have internet or cell service and still had a safe place to live and sleep (and perhaps the experience was even better because you didn’t have these services we assume must always be always there).

This is the category that is painful to put things into. This is the category where that single-file 1-50 prioritization process is hard, but very effective.

In this category are things that feel mandatory but are truly discretionary. If you have a risk or audit item, it might fall within this category. What determines whether it is non-discretionary is the consequences of de-prioritizing the work.

If you choose not to act on an identified risk or audit item, what is the consequence? If your business will shut down, then that is non-discretionary. If your business won’t shut down, then this item isn’t truly mandatory. Maybe you show up with a red status on some report. Maybe you end up on the front page of the newspaper. Maybe you disappoint some stakeholders. Maybe there is a monetary penalty.

And maybe each of those consequences are less expensive to you than fixing the problem. If that is the case, then this item is like your internet or cell service. Something you really feel you need, but if you had to, you could cut.

This is the most difficult category to fill. This is where all your growth opportunities live. This is where innovation lives. This is where process improvement lives. None of these will be easy to put into this category, but they must be. Because once they are in this middle bucket, then you can prioritize them.

You can have very healthy discussions and debates on whether in this moment growth is more important than improving customer satisfaction. Or whether increasing quality and efficiency through automation is more important than doing work for a marquee customer that could drive additional visibility to your business.

These are interesting prioritization discussions. These are necessary prioritization discussions. And these prioritization discussions will ensure that your business is working on the right things and headed the right direction.


If it feels silly to try to rank every responsibility, piece of work, or initiative from 1-50 in order of importance, that’s because it is.

It doesn’t benefit you to debate whether you should pay your power bill or your water bill this month. Both are mandatory.

Move past the non-discretionary items and push deep into that middle category of painful-discretionary. Identify all those things you really, really want to do to advance the needs of your business. Put them in order from 1-50 and ensure that the top priorities get the attention they deserve.

It won’t be easy. It won’t be comfortable, but it is critical.


And once you’ve decided your top priority, then I recommend you perform an ‘ABC’ prioritization for all the work within that top item. You will find 3 very similar categories of work inside each item. Not every part of your top priority is non-discretionary within that top priority. Many times the things that get people excited about a priority are really in the Netflix/want-to-do bucket, not the Power/must-do bucket. You have to ensure that you’re spending your time on the most important parts of the priority, rather than the most flashy or most interesting.