Never Compromise Your Values: A Financial Perspective
“When your values are clear, your decisions are easy.” This quote from renowned financial advisor, Bill Bachrach, serves as a cornerstone in the world of personal finance. At first glance, it may seem like another inspirational quote, but its true depth is revealed when we apply it to our financial lives.
Foundation of Values
Values are the bedrock of decision-making. They are the guiding principles that direct our actions and reactions. Whether consciously acknowledged or not, values influence our choices in life, including our financial decisions.
Let’s consider a simple and obvious example. Suppose environmental sustainability is one of your core values. When this value is clear, your financial decisions become easy. You may choose to invest in green companies, purchase eco-friendly products, or even adjust your lifestyle to minimize your carbon footprint.
Not sure exactly what your values are? Consider your answers to the following questions as a guide to starting to understand your personal values.
Questions to Determine Your Values
Where, how, and on what do you spend your money on?
Where, how, and on what do you spend your time on?
What matters most to you in life?
Can you identify moments when you felt truly happy or fulfilled? What were you doing at those times?
What angers you? What brings tears to your eyes?
Think about times when you’ve faced tough decisions. What factors did you consider before making your decision?
If you had to choose between a high-paying job that you dislike, and a job you love with a low income, which would you choose and why?
What are your long-term goals and aspirations? Are they aligned with your daily actions?
Are there any causes or issues that you feel particularly passionate about?
In what ways do you invest in your well-being and personal growth?
What characteristics do you admire in others and why?
If you could change something about the world, what would it be and why?
What legacy would you like to leave behind?
The Role of Financial Planning
Financial planning comes into play here. It’s about aligning your financial decisions with your values and setting a path to achieve your goals without compromising your principles. Financial planning with values at the core ensures your economic actions are in harmony with what matters most to you.
Financial planning plays a crucial role in mitigating the danger of compromising your values. It involves aligning your financial choices with your core beliefs, setting a roadmap to reach your goals, and maintaining your principles. By centering your financial planning around your values, you can ensure your monetary actions consistently reflect what is most important to you. This approach not only brings internal harmony and confidence but also leads to sustainable financial stability, provided you never compromise your values.
Dave Ramsey, a renowned personal finance expert, profoundly emphasizes the role of financial planning. He encourages people to plan their finances in a way that accounts for every dollar earned, allocating it purposefully to address objectives, rather than letting it vanish into unplanned expenses. This meticulous planning aligns with your values, ensuring that your money is used in a way that supports your financial principles and aims, rather than undermining them. Ultimately, through careful planning and wise budgeting, Ramsey asserts that financial freedom is attainable for everyone.
Embodying Values in Financial Actions
J.D. Roth, the founder of Get Rich Slowly, once said, “The road to wealth is paved with goals.” His statement underscores the importance of setting clear, value-based financial goals and consistently working towards them. He posits that wealth accumulation is not about quick fixes, but about steady, goal-oriented efforts.
In a similar vein, Paula Pant, the author behind Afford Anything, insists, “You can afford anything, but not everything. What’s it gonna be?” Her quote emphasizes the necessity of making financial decisions that align with your personal values and priorities. She urges readers to make conscious choices about where to direct their money, keeping their long-term goals in mind.
But, we can’t be so long term focused that we are no short term good. We’ve all heard the tragic stories of “super-savers” who died early having never enjoyed their frugality. Striking a balance between today’s financial necessities and tomorrow’s savings demands is a delicate act of tightrope walking. In this financial journey, it’s pivotal to enjoy the present but also stay focused on the future. In essence, we should strive to meet our immediate needs without compromising our future financial security. This means making sound financial decisions that enable us to relish today’s experiences, without sacrificing the ability to afford future aspirations. This might involve pursuing experiences that bring joy and satisfaction, but within a budget that also allows for consistent savings. Crucially, it’s about living within one’s means, while still setting aside a part of one’s income for the future. This way, we can enjoy our journey today while also paving the way towards a financially secure tomorrow.
How does one practically walk that tightrope? You spend on purpose and spend on priorities. The rest, you invest.
Spending on purpose is about making financial decisions that align with your values and goals. It’s about being intentional with your money rather than allowing it to be spent mindlessly. When you spend on purpose, each dollar that leaves your account does so with a specific intention – whether it’s enjoying a nice meal with a loved on, attending a sporting event of team you cheer on, taking that dream vacation while you are healthy, saving for a future dream, investing in personal growth, or contributing to a cause you deeply care about.
On the other hand, spending on priorities refers to the allocation of funds towards what’s most important to you in life. This could be anything from investing in your child’s education, saving for a comfortable retirement, or contributing to social and environmental causes. Spending on priorities helps keep your financial life focused and prevents the squandering of money on things that matter less. Ultimately, the act of spending on purpose and priorities allows you to live authentically, bringing you closer to achieving financial sovereignty and confidence.
So, how can we embody our values in our financial actions? Make conscious decisions. The whole idea is thoughtfulness and authentic consistent decision making. Say “Yes!” to what matters to you, and let everything else pass. When faced with a financial choice, take a moment to reflect on your values. Ask yourself, “Is this decision aligning with my values?”.
Prioritizing Financial Decision Making
One of the most effective tools for making financial decisions is a matrix strategy, inspired by Stephen Covey’s time management grid. This matrix has four quadrants, each representing a different level of urgency and importance.
Quadrant 1: Urgent and important – This quadrant includes activities that are both urgent and important, such as paying bills or responding to financial emergencies. These tasks should be handled immediately. Other items in this category, consumer debt elimination, building an emergency reserve, and getting control of your spending.
Quadrant 2: Important but not urgent – Activities in this area are important for long-term financial health but are not necessarily time-sensitive. For example, planning for retirement, investing for various short and long term goals, or setting up an education savings account fall into this quadrant. These tasks should be scheduled and prioritized.
Quadrant 3: Urgent but not important – This quadrant includes activities that seem urgent but don’t contribute to our financial goals. For instance, impulsive purchases or investments that promise quick returns but lack long-term value.
Quadrant 4: Neither urgent nor important – These activities neither contribute to our financial goals nor are they time-sensitive. Examples include unnecessary spending or investing in ventures without doing proper research. These activities should be limited or eliminated.
By using Covey’s matrix, we can prioritize our financial activities based on their level of urgency and importance, ensuring that we make decisions that align with our values and contribute to our long-term financial health.
Clarity in values, thus, translates into clarity in financial decisions. But how does one achieve this clarity? The answer lies in introspection. Recognize what truly matters to you. What are the ideals that you wouldn’t compromise on? Once these values are identified and acknowledged, they become your compass, directing your financial decisions.
The Danger of Compromise
However, the path of acknowledging and sticking to your values is fraught with challenges. One of the gravest dangers is the temptation to compromise on our values under the pressure of immediate gains or societal expectations. Winston Churchill once said, “An appeaser is one who feeds a crocodile, hoping it will eat him last.” Translated into the financial world, this potent metaphor warns against the folly of compromising on your financial values for short-term benefits, as it only leads to long-term perils. A compromise today might seem profitable, but it often ends up undermining your financial stability and personal integrity in the long run. Hence, it is crucial to stand by your values in the face of temptation and maintain your financial health intact.
The danger arises when we compromise on our values. Take, for example, someone who values financial security but consistently spends beyond their means. This discord creates internal conflict and leads to financial decisions that are not aligned with their values.
In conclusion, never compromising your values is not just a financial concept; it’s a way of life. It ensures confidence and fosters a sense of fulfillment, as you know your financial decisions are not just about money but also a reflection of your personal beliefs.
Remember, “when your values are clear, your decisions are easy”. So, identify your values, make them clear, and let them light the way to your financial well-being.
Brannon is a financial advisor with LPL Financial and also serves as the team’s wealth manager. He joined Prosperion Financial Advisors in 2004. In addition to being a Certified Financial Planner® (CFP) and an Accredited Portfolio Management Advisor®, Brannon has a Master’s degree in Leadership from Denver Seminary. He is passionate about helping clients make wise, informed, investment and financial planning decisions. He is married to the love of his life, Melanie, and is the proud father of his son, William. When not working with clients or spending time with family, Brannon enjoys being in the outdoors of the Colorado high country, skiing, fly fishing, and exploring wild country.
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