Good financial planners start the financial planning process with a discussion of your values. They then move into setting specific goals and then design and implement a financial plan to reach those goals. People like me who do their own financial planning should follow the same steps. This was impressed upon me again after a discussion I had with my wife the other day.
I Hate Touchy-Feely
I've always been a little more attracted to the design and implementation of the plan than the values discussion. It always seems so wishy-washy and touchy-feely as opposed to the hard numbers science of running projections, opening accounts and choosing investments. I wrote a few weeks ago about trying to live my life as though I'm already financially independent (don't worry, I'm not and won't be for another decade at a minimum). I've been giving this a great deal of thought recently. I sat down with my wife to have a discussion about when and how we should pay off the mortgage (more on that in another post) and our discussion ended up being hijacked into a talk about what we really valued.
What My Wife Values
She listed some things she'd like to do, mostly involving travel:
- Take her daughters to New York to see some Broadway plays (she doesn't want to take our very energetic and usually naked 4 year old son for some reason)
- Take the kids on a 2 week European Vacation
- Move to a third world country for a year
I pointed out that we don't actually have to make any financial changes at all in order to do two of her three items. All she has to do is buy the tickets and we'd have to schedule the two week trip so it overlaps into two months so it doesn't screw up the all important emergency department schedule. The third would obviously have a much larger impact on my job and our finances. It has become clear to us that time is money. The more I work, the more money we have. The more money I have, the more of my own time I can buy with it.
My Values
I thought about some of the things I value, like sleep and more days off. I'd love to cut back from my current 15-16 shifts a month to 12. I'd also like to drop my night shifts and have more evenings to spend with the kids, play hockey, and help with the local Boy Scout troop I volunteer with. Traveling both with and without the family (sorry, but some of the adventures I'm interested in just aren't appropriate for young children) is also important to me. It won't surprise the regular reader that our discussion never touched on buying more stuff like fancy cars, RVs or furniture.
More Than The Number
Financial planning isn't just about arriving at your “number” as soon as possible. Sometimes maxing out retirement accounts isn't the right thing to do and that money (and the time required to earn it) can be used more effectively in alignment with your values and goals. If we're really going to live in Guatemala or Nigeria for a year, we're going to need some money outside of retirement accounts. It might cost a little more in taxes, but why should minimizing taxes be anywhere near the top of our values list?
What do you think? What have you done to align your financial habits with your values? Comment below?
In my opinion, values-based financial planning is the only way to go. Money is great, but it’s only important if it helps you do the things that you want to do with your life, and the clearer you are about what’s important, the easier it is to make financial choices to support that vision. As I often tell clients, you can’t say no until you have a bigger yes, and getting clear about that big yes makes saying no to all of the small daily ways that can get in the way of that long-term goal.
I’ve been thinking a lot about this topic lately. Frankly I think it needs more discussion than this short post… but it isn’t as easy to write about because there’s no hard facts and everyone is different.
I’m 35.. been in business 12 years.
I’ve definitely had a lot of fun along the way, but really limited myself on a lot of things due to wanting to build up the nest egg.
And it worked… i’ve got a massive retirement savings relative to my age.. with my wife combined it’s north of 500k which means i probably have more saved than 99.9% of people my age.
But as I’m watching my friends age and not have time/money for things anymore like ski trips, vacations, epic nights out.. i.e. everything that was fun… and I’m watching my money get spent on things that suck like home remodeling, or stuff for the baby or college funds or other crap..
well I’m regretting to an extent not going all-in on my 20’s and maximizing my fun then before things got a lot more un-fun.
and even now i’m really looking at my life and seeing friends/family go through knee surgeries, hip replacements, sore backs, limited mobility…
and I’m thinking again that I want to go all-in on what’s left of my 30’s with higher intensity activities that I can do before that’s over.
At some point you begin to wonder what/who you’re saving for… some old guy in his late 50’s that can’t waterski, can’t run a 5k, etc.
It’s definitely a balancing act. I’m writing this from Zion National Park. I descended a canyon today, will do another one tomorrow, and another the day after that. I took the Scouts canyoneering last week for four days. I spent 10 days in Alaska last month. I’m going to the Wind Rivers next month for a week of climbing, then two weeks later going to Lake Powell with the family. You’re preaching to the choir brother. There’s got to be a balance. Put away a reasonable amount for retirement, and blow the rest on fun. And if I can’t run a 5K or waterski in my 50s, it won’t be for lack of trying.