Most of us desire a life of significance. If that’s not you, then no need to read on. For those that do share that desire, significance could mean a certain level of financial or career success, life-long friendships, or spiritual and personal growth. The items that create significance in our lives are based on our personal values and how we live those values out day-to-day. You are unique, and you are worthy of living a life of significance. One of the best ways to do manifest significance in your life is to link your values with your financial behaviors. Your choices around money both reveal and predict your values and standards. As you more clearly identify what matters to you, and get specific with your money habits around those priorities, it becomes easier to manage your finances.
There are a few steps to live your values through your financial behavior. While these steps are sequential, the process is iterative. You repeat and review over time. This isn’t a one-time test. You don’t fail. You learn and adjust.
1. Identify your values
Do you value security? How about independence? Your values are a combination of your intrinsic personality, as well as your socialization growing up. These values may and can change, but for most of us, they tend to stay the same throughout our lives.
Financial security may mean being prepared for an emergency. Our family generally keeps 2-3 months of necessary expenses on hand in case of job loss or another major problem. For others, it is having some extra income coming in through a second job, or perhaps a rental property. For others, it is having a government or union job, from which they will not easily be fire.
I have a personal value of independence. When I was a little girl my mother used to say to me, “Ariel Grace, you just have to learn it the hard way.” That was my independent streak shining through at the age of three. There are pros and cons to being independent, but there is no getting around that I find financial independence to mean not owing anyone anything and not depending on anyone else. For our family, that translates to a low debt burden.
You can read more on understanding what you value in “Figuring Out Your Values”
2. Understand your standards
Your ideals make up your dreams. Your standards make up your real life. Real life beats your dreams every day. Your standards dictate most of your day-to-day actions, because you tend to develop habits around your standards. My ideal is to be at my desk at work by 8:30 a.m. If I arrive after 8:45, I count that as being late. I know that I have to walk out my front door between 7:40 and 7:50 a.m. to ensure I’m not late. I sometimes arrive at 8:30, but I always arrive by 8:45. My habit of leaving at 7:40 is based upon my standard of not being late. My standard is “don’t be late,” which translates into being at my desk by 8:45.
Our standards mediate our values. You may like the idea of the FIRE community (Financial Independence Retire Early), but you are comfortable with retiring at 65, and your savings mirror someone who will retire at 65. Your standard for retirement will mediate your value of independence. You may say you value financial security, but you also value having a brand new vehicle. If you continually purchase a higher priced vehicle, and short your emergency fund, you are showing that your standard for financial security related to a savings fund, is lower: Your savings account standard is one paycheck, not one month of living expenses.
While your values are less likely to change, but your standards can often change. For instance, you may value a clean home. For some time, you clean it yourself. Later, you hire a cleaning service. Most people never like to go back to cleaning their own home, after they’ve hired and used a house cleaner for some time. Their value of a clean home remained constant, but their standard around who is responsible for the cleaning changed.
Most of us base our standards off of those around us. If you want the same outcomes as those around you, there is nothing wrong with that. But if you want a different outcome, such as avoiding financial stress or arguments with your spouse, you will need to change your standards around finances.
You can read more about how my spouse and I continue to work through our financial standards in “Reasons You and Your Spouse Don’t Agree On Money: Part 2 – Standards and Real Life”
3. Develop habits that support your values and standards
Your day-to-day habits are the main predictor of your outcomes. If you change your habits, you will change your life. Habits are how you make your standards a reality. My ideal is arriving at work at 8:30 a.m. My standard is “not late”, or 8:45 a.m. My habit is leaving my house at 7:40 a.m. For years, I was often late to meetings and events. I figured out that I was always allotting myself exactly the amount of time I would need to arrive at a designated time, but that often was not sufficient. I hated arriving late, but my habit was to only allot the exact amount of time required. I changed my habit. I began allotting enough time to arrive “early” by 5 minutes. In the event I arrived early, I had an article or e-book ready to read.
Financial habits that support my goals for financial independence included keeping my housing costs low at all costs. For our family, keeping our housing costs to 25% of our combined net household income, has allowed us to set money aside for other items: retirement accounts, rental property, savings, and yes, a little fun, too.
Financial planners tend to focus on day-to-day habits not only because over their cumulative impact over time on our financial outlook, but because habits are sometimes the easiest to change, compared to values and standards.
You can read more about building habits in “How to Make Saving a Habit”
One of our biggest problems with making our values clear and knowing that our life is significant, is that we fail to be honest about our values, standards, and habits. You can have the same values as another person, but different standards and habits. You are free to live a very different life from someone else, and still enjoy a life of significance and meaning.
If you are interested in linking your values and your behavior, you are welcome to schedule a one-time consultation, or on-going coaching. Please message me for more information.
You may also participate in my up-coming April Values Based Finance workshop. Please check here for more information.
Photo by Amandine Pasin on Unsplash
Comments
One response to “How to Link Your Values and Money”
Thanks for that shout-out. The occasion for the experience was ruining a pair of white tights running after Alex as he was getting on the school bus. I had told you not to run, but you did. After a bit of scolding, I was at the kitchen sink. The washing machine was going, chug-a-chug, chug-a-chug that had a certain beat. I became aware that you were singing a little song you’d made up to the beat of the washer: “I learned it the hard way! I learned it the hard way!” Do you remember?