On your path to get good at money, values are how you’ll get there.
Values are what you believe to be of the greatest worth. The more we can incorporate our values into our decision-making process, the better off we’ll be. This is true for our personal finances.
Values = Greatest worth
A key to long-term, sustainable financial success is to align as much of our lives as we can. When you align your goals with your values and your habits, you’re aligning what you want, with who you are, and how you do things. Doing that positions you for success.
My goal is to help you get clarity on your personal financial values to help you get good at money; something I’ve been helping people do for over 20 years as a financial advisor. I’m honored to be named to Investopedia’s list of the top 100 financial advisors many years running.
Here’s what we’ll cover:
Let’s get started.
Why spend time thinking about this?
Why spend time thinking about this? Because money is a finite resource that we work long and hard to earn. It’s valuable. After working so hard to gain it, why would you be haphazard in how you use it?
Even if it’s not finite, it’s prudent to take a thoughtful approach to how you’re allocating your money. The most financially successful people are commonly the most thoughtful about how they interact with their money.
Saying “yes” and “no”
When you say “yes” to one thing and allocate money to it, you’re saying “no” to everything else. This is true for $1, and it’s true for $1,000.
No, buying a $1.29 bottle of water today won’t have that much of an impact on your life. Over the course of 10 years, that habit would cost you around $4,700. You can decide if that’s worth it to you or not.
Either way, money has time value. Practically speaking, that means the earlier you begin pursuing your financial goals, the easier they are to achieve. The longer you wait, the harder it becomes.
You’ve heard the saying, “How you do one thing is how you do everything.” I used bottled water as an example because it’s one of the smallest expenditures we make. But when you pay attention to the smallest, you’ll pay closer attention to the biggest as well.
Making the decision to buy a bottle of water every day is way less consequential than spending too much on your house or car. When we make poor decisions with big expenses, we end up on the wrong end of the time value of money equation.
Putting value-based decisions to work
Value-based decisions > non-value-based decisions
I’m confident we can all agree that making value-based decisions is superior to making non-value-based decisions. But how do we do it?
Have you ever heard this one, “If it’s not a hell yes, it’s a no?” That can be a helpful tool in this process, but more so for whether to spend money on something or to not. But what about things you have to spend money on? Things like clothes, cars, and housing?
I’ve found it helpful to break this process down into categories. From there, you can start making thoughtful decisions about what you believe to be of greatest worth. Here are the main categories I suggest you consider:
WAM
Also known as walking around money, this is everyday spending we engage in. The earlier phrase hell yes, or no, can be helpful in helping you decide what to spend your money on.
I value convenience, and I also value money. So when I’m making the decision to make coffee or lunch at home, or buy it when I’m out, I try to be thoughtful about it. Some days the coffee gets made at home, some days I’m in one of my favorite coffee shops.
Groceries and food away from home
Pre-Pandemic, Americans began consuming more meals away from home than at home. While there are many negatives to this, this behavior has meaningful financial implications. Eating out is 3.4 times more expensive than eating at home.
Is your next meal out 3.4 times better than it would be at home? If yes, then perhaps that’s a good use of your money. If it’s not, don’t do it.
In terms of shopping for groceries, there are a lot of value decisions to be made. You need to decide where you’ll shop for your food. Will you buy organic? Do you have a specialized diet? Will you buy brand name only? Each of these decisions has a financial consequence that must be considered.
Travel and vacations
Vacations are one of the best parts of life. A trip to Disney or a beach vacation can create a lifetime of memories. And you can be smart and make decisions that align with your values while having an awesome time.
Will you drive or fly? Will you stay at hotels, or rent a house? Will you shop for groceries once you arrive, or eat out? The more thoughtful you can be about each decision, the better off you’ll be. Spending time thinking through these decisions on the front end will allow you to more fully enjoy your experience both during, and after. The last thing you want is to compromise your finances for a week-long vacation.
Social life
It’s important to have fun, pursue hobbies, and enjoy life. As you go through life, your interests will change. It’s wise to consistently reevaluate what you’re spending your money on, and what you’re getting out of it. Just because you’ve always done a dinner and a movie on Saturdays doesn’t mean you should keep doing it.
Education
You can include your personal development and your kid’s education here. One of my core values is lifelong learning, so I advocate for investing in yourself.
With how you’ll educate your kids, fewer decisions are more emotional and important. Giving your child the best experience possible must be balanced with your long-term financial priorities. Put another way, if you spend all your money on your kids’ education and fail to save for your retirement, your kids are your retirement plan. Make sure everyone is comfortable with that.
Transportation
Americans love cars. Moreover, we appear to love overspending on cars. The typical car is parked 95% of the time. While that doesn’t mean you’re not enjoying owning it while it’s parked, it’s food for thought.
Housing
Our houses are literally our homes. They’re our refuges, where we raise kids, and so much more. And, they’re our largest expenditure. A bad decision (spending too much) has a tidal wave effect on the rest of our finances. Again, when you allocate one dollar to one thing, you can’t allocate it anywhere else.
Saving and investing
We have choices about how much and where we save and invest our money. Are you a stock market, real estate, small business, or crypto investor? Is impact or ESG investing a priority? How big should your emergency fund be?
While it may logically make sense that more choices are better than fewer, that’s not actually the case. Commonly, more choice leads to less happiness. Taking the time and making value-based decisions will help you avoid falling victim to the tyranny of choice.
Closing
When you align your goals with your values and your habits, you’re aligning what you want, with who you are, and how you do things. When you do that, you’ve positioned yourself for success.
If you’re ready to take control of your financial life, check out our DIY Financial Plan course.
We’ve got three free courses as well: Our Goals Course, Values Course, and our Get Out of Debt course.
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