Do You Know Your Financial Values?

A global pandemic can really make people think hard about what matters most. Especially when it comes to how we spend and save. 

For many people, addressing debt or saving for retirement remains atop the list of financial priorities. However, a growing number are also considering changes like working from home, changing careers, and redefining expectations in areas like travel or education—all of which can impact your finances. 

Getting a practical handle on your budget is a great idea, but knowing why you spend money can be just as important as understanding how you spend it. Our relationship with money is a longstanding, sometimes fraught relationship that few of us spend much time examining. And we aren’t often—if at all—asked to contemplate our values as it pertains to our finances. Sure, we might think we know “why” we’re saving or spending when there’s an immediate outcome in mind, but according to experts, identifying your financial values can help guide your decisions and behaviors across all money matters.  

What Is a Financial Value?

According to Thomas Brock, CFA, CPA, and expert contributor for Annuity.org, financial values are “the monetary principles and beliefs that are important to us. They motivate us, guide our decisions, and shape our behaviors.”

In other words, financial values represent the motivation behind your spending, like luxury, education, travel, health, and family or relationships.

Vicki Cook, the co-founder of Women Who Money adds a personal touch to her definition: “Your financial values align with your core personal values.”

Financial values aren’t always tangible concepts or people, they can also be anything we feel strongly about. A few values our financial experts say fall into this category include security, freedom, flexibility or spontaneity, giving to others, and living simply.

Discovering Your Financial Values

To get clear on your financial values, you have to be willing to ask yourself some big picture questions and then drill down with personal answers.  

Zoom out.

CPA and founder of personal finance site Money Done Right, Logan Allec, suggests taking a step back from money matters to discover what you truly care about. “You identify your financial values by first identifying your overall life values and then orienting your finances around them. Maybe you want freedom and spontaneity, to be able to do what you want whenever you want. In this situation, your financial values would, unsurprisingly, be financial freedom and financial spontaneity.”

Unlike what many choose to believe, financial values are very similar to personal beliefs, which means discovering yours may require some soul searching.

Reflect thoughtfully.

Brock takes a more direct approach, and encourages people to identify their attitudes towards money head-on and routinely checking in with your relationship towards money. 

“Ask yourself: What do you want to accomplish with your money? What does ‘financial success’ mean [to you]? How do you feel about saving and spending? Do you know where your money comes from and goes every month? Does budgeting make you feel in control or constrained?” 

He also suggests taking a closer look at your past financial decisions, both the proud moments and the embarrassing ones. Pinpointing your most and least favorite experiences with money can clue you in on the types of behaviors you prioritize. And so can noting other people’s financial decisions that inspire or frustrate you.

Make two lists.

Personal finance expert Chris Panteli, founder of lifestyle blog LifeUpswing, prefers to combine the two strategies, starting with a list or two.

“Make a list of things that are important to you. Put that list aside for at least 24 hours. Make another list of things that are important to you, but this time don't think of anything to do with money. When you're done, compare the two lists. What do you notice? If there is a disconnect between your financial values and what you actually do with your money, chances are you may be making a mistake.” 

This insightful strategy challenges you to look closely at your own priorities in life from multiple angles.

Putting Your Financial Values In Action

Deciding what’s most important to you is key to making a solid financial plan and goals. Your values indicate where you prefer your money to go, creating a path for your budget to follow. They can also help you identify and resolve any disconnects between your values and spending.

Create smart goals.

The first step, says Allec, is to set measurable goals for each financial value. “For example, if financial freedom is one of your main values, you may set a goal for yourself to invest 40% of your income every year so you can have the freedom to take a job you enjoy more, start your own business, or simply not work at all.”

Creating a measurable goal is just one aspect of successful goal-setting. According to the popular SMART method, effective goals should be: 

• Specific: Say exactly what you want to accomplish and the steps you’ll take to get there.

• Measurable: Add in the numbers so you can track your progress.

• Achievable: Make your goal reasonable, based on your needs and situation.

• Relevant: Tie each goal back to your financial values, so you know you’re on the right track.

• Time-bound: Include a deadline for good measure, which will give you a reason to celebrate once you’ve accomplished your goal.

A great example of a SMART financial goal could be “I want to build a $5,000 emergency fund by the end of next year” or “I want to pay off an extra $200 a month in debt for the next 3 years.” 

Direct your spending.

For those who prioritize health and fitness, Sandy Yong, the award-winning author of The Money Master, suggests ways to move more money in that direction. “You may purchase a gym membership or fitness equipment so that you can stay active and healthy. Perhaps you would save up money to attend a week-long wellness retreat.”

Now spending based on your priorities may sound like obvious advice. But as Panteli said in the previous section, aligning your core values with your financial actions can be more complicated than it looks. Even if you value saving for the future, for example, it’s still easy to shrug off your budget or delay making some hard money decisions.

But knowing your priorities isn’t enough. You also have to make a plan for where you want your money to go and what you should avoid spending on. Choosing to prioritize health, for example, may mean skipping out on some of life’s other luxuries, like eating out often or buying a nicer car.

Find creative ways to save.

It’s really about having the mindset to ask, “How can I get what I need for less—and maybe even have room for a splurge once in a while?” says Lisa Thompson, a savings expert for Coupons.com.

Groceries, says Thompson, are one spending category that people tend not to look at too closely. Making grocery lists or buying in bulk and splitting costs with other families are just a few ways to save. Using cash for groceries can encourage you to spend less as well, because “you always see exactly how much you have available.” And, of course, so do coupons.

But saving creatively doesn’t just mean doing more with less. After all, you want to make that extra money work for you. According to Cook, you should invest anything you save because “even small amounts compound into much larger ones over time!” 

No matter what your values, having that additional cash will make meeting those long-term financial goals easier.

Your Values-Driven Future

There’s a lot still happening in the world today, and no one knows what the future will hold. Even as we look forward to a full pandemic recovery, now’s a great time to consider how you want to spend and save differently. 

You’ll be glad that you did. “When you’ve identified the financial values that really underpin your psyche, you can improve your ability to set and achieve your goals,” says Brock. “You’ll find it easier to prioritize, budget, and save, and you’ll feel better about the ways you spend and invest your money."

Because as we’ve discovered, financial values don’t just reveal why you spend. They reveal what’s most important to you, what you’re willing to work and save for, and how you can best live your life.