Values-Based Financial Planning
Last week one of my friends achieved a dream of a few years in the making. He finished Ironman Taiwan in less than 10 hours. Knowing how important the goal was to him and the whole family, his wife made Sub 10 t-shirts and hats for them and their two daughters to celebrate the occasion — in 2016! For almost four years, he kept the outfits ready at every race, secretly hoping he and his family would get to wear them. He finally did it last week! How did he do it? He worked hard, had a plan, and kept his eyes on the prize by having his goal printed on t-shirts and hats.
Achieving anything important in life requires a sound strategy. If something is important, we can’t just wing it, we want to give it our best shot. Ironman athletes don’t just show up for a 140.6 miles of swimming, biking, and riding. They have a strategy, they follow a plan. They have a strategy for each race, a strategy for the season, and a vision for their longer term career goals, like Sub 10. It’s the same in any career, or business, and even relationships.
Start with Values
At DESMO, we use the word values to summarize anything important that you are trying to achieve in life. A lot of advisors and columnists talk about setting goals for yourself, like a retirement goal, a nest egg goal, etc. There is a difference between goals and values. Values are deeper. They are the why of your plan, what makes your pursuits worthwhile. Goals are measurable objectives, like retiring in 10 years with $2 million dollars in the bank, etc. A successful strategy always starts with a clearly defined set of values. There has to be a why behind Sub 10. That’s the personal set of values that make you identify Sub 10 as a goal worth pursuing. Two people with the same Sub 10 goal are most likely doing it for different reasons —they have different values.
The Most Important Money Question
The reason why values are important is that achieving any goal requires time and it involves delayed gratification. That is something we aren’t wired to deal with very well, as we know from the Marshmallow Test. So how do you identify your values? You have to work on it. The starting point is to ask the most important money question, your why. Why is money important to you?
In most cases, the answer needs to be refined to be useful. For example, people may answer the why question with: “to have security”, or “freedom”, or “flexibility.” These aren’t very clear yet. Why is security/freedom/flexibility important to you? The process requires a bit of effort and is best done with a trusted friend or a partner, and the help of a trusted financial planner.
At the end of the refining process, most personal values are an expression of core values that include relationships, maximizing potential, life experiences, self expression, and more. An example of values could be spending time with my family, experiencing life together, and giving back to my community (relationships, experiences). Or start a business that lets me fully express my creativity one day, and travel to a different country every year. You don’t have to cover your whole lifespan; focus on what’s important to you now. We have our own DESMO discovery process, so you can talk to us to clearly identify your values. Or, if you want to do it yourself, I suggest books like the One Page Financial Plan by Carl Richards, Off Balance, by Matthew Kelly, or Values-based Financial Planning by Bill Bachrach. They all have a set of questions outlining a similar discovery process.
Write them down on sticky notes
Having clear values is not just a step in creating a personal plan. Clearly formulated values act as motivators, can help us acquire and stick with good financial habits, and get us out of negative thinking when things get tough on the way to success. It’s like having a Sub 10 t-shirt waiting for us. That’s why I recommend writing the values down. The best way to do it is with colored sticky notes. As a public speaker, I learned the sticky note method to create presentations. Each slide is represented by one sticky note. Each slide should contain one idea or concept, no more. To make sure you are crystal clear about the concept on each slide, you use a sharpie to write down the concept you want on each sticky note. If you use 3×3 sticky notes, there is not much you can write, so that gives you a good frame to be clear and concise. If it does not fit in one sticky note, it’s too much for a slide. It’s the same with values. Use a sharpie and one sticky note per value, like this.
The emotional payoff
Now your intentions are clear. Stick them to a nice board and keep them handy. Just having your values (and later goals) written down is empowering. It is a good motivator to work on your life goals. Clear values will come to mind the next time you are flirting with bad habits, like overspending on something you don’t need. Reviewing something we believe in during tough times can appeal to our aspirational nature, and help us find the strength to overcome setbacks. Research in behavioral economics and psychology backs this up. If you don’t like the idea of using sticky notes, print your values on a t-shirt or a hat!
You may have noticed something missing from this discussion. A lot of people go to a financial advisor to know WHAT to do with their money. That may be important, but you can’t start with that. Starting with WHAT does not work. The WHY is the foundation of a successful plan. To learn more about the power of why, read Start With WHY by Simon Sinek or talk to us.
Until next time!
Massi De Santis is an Austin, TX fee-only financial planner. DESMO Wealth Advisors, LLC provides objective financial planning and investment management to help clients organize, grow and protect their resources throughout their lives. As a fee-only, fiduciary, and independent financial advisor, Massi De Santis is never paid a commission of any kind, and has a legal obligation to provide unbiased and trustworthy financial advice.
