Using Values to Make Financial Decisions

The more attention you pay to the money matters of your life, the more frequently you'll hear words such as "goals," "time horizon" and "risk tolerance." They are three legs of the financial stool. Can you achieve your goals? Depends on how long your investments will have to grow and your ability to handle the normal ups and downs of the market.

More and more people are openly adding a fourth leg to their stool – values. Some would argue that values play a role in most, if not all, of a person's financial decisions. Trouble is, we're not always aware of the impact our values play, or we act contrary to them – either intentionally or otherwise.

Here are several ways you can incorporate values into your financial life. You probably do most of these things already whether you realize it or not.

• Think about It – No, this isn't one more way to procrastinate. You need to know what's most important in your life. What do you cherish? What couldn't you live without? It's not bad to buy things, but those things shouldn't replace what you cherish in life or cause you to not afford more "value-able" pursuits.
• Budget with Values in Mind – Track your expenses and spending for a month or so. (Our fillable balanced spending worksheet (PDF, 622K) can help.) It could reveal some money habits that need changing. And it can help you shape future habits, such as saving for the future, charitable giving and providing for your family.
• Stay 'In Touch' with Money – Credit cards and online transactions have eliminated the "touchy-feely" aspect of money. Using cash more often may help you stay in touch with what's yours – and what you're willing to give up the greenbacks for.
• Protect Future Income – You owe it to yourself and friends and family to protect your earning power with disability income insurance and/or life insurance.
• Save for Goals – If you want to adopt a kid or buy a small business or retire at 55, values-based money management can help you achieve your goals. It's easier to hold yourself accountable if you can see what you're aiming for. (That means write your goals down (PDF, 19K).)
• Give to a Cause that Counts – If you choose to make charitable (and tax-deductible) contributions, one way to select a worthy cause is to think about an issue or cause that has touched your life. You'll be more passionate about your involvement and more willing to give.
• Teach Values to the Next Generation – You can teach young people you know valuable lessons merely by handling your money responsibly. If they see that you make thoughtful spending decisions and that you save money toward achieving your goals, they may adopt your habits. We offer workshops for parents with young kids and teens to help get those money conversations started. Find a workshop in your area.

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