As naturally social creatures, relationships are essential to our everyday lives even for my 19-year-old college sophomore daughter who likes hugs about as well as a desert cactus. Relationships can help us advance through our career; they can be the source of fond memories and can even help us live longer.1 But there’s one relationship that impacts all other aspects of life and must be nurtured and revisited: our relationship with money.
When it comes to personal finance, the one word that needs more emphasis is personal. Everybody that you come across has a different relationship and experience with money. So, you must dive deeper into your own relationship to better understand how your values are being reflected in actions or why certain emotions drive decision-making.
In this article, we break down a few questions you can ask yourself to help uncover your money values and ultimately help you live out a better financial future.
Does my spending align with my values?
When thinking about your financial future, one of the first areas to spend some time on is your cash flow. In the world of personal finance, a lot of what happens is out of our control. However, the one thing that we do largely control over is our spending.
As personal finance author and entrepreneur, Ramit Sethi states, “show me someone’s calendar and their spending, and I’ll show you their priorities.” Whether you know it or not, your spending is a direct reflection of your subconscious values.
To help get a better understanding of where you currently are, go through your past few months of spending. This step can feel tedious, but it needs to be done to get a grasp of where your money goes. You can make it easier by using a budgeting app such as Mint or You Need A Budget or by accessing your bank statements online.
Once you’ve looked at the current state of your spending, you can begin to consider whether it aligns with your values. By diving into your values, you’ll be able to figure out where you truly want your money to be going and what expenses no longer align.
What do you regret spending money on? What do you wish you had spent on instead? Were you able to spend money in ways that further long-term goals, or was it all just short-term spending? Are you paying down debt, or is your debt increasing? Do you want to increase charitable giving? Are you saving enough to make your own dreams come true? What are they?
This exercise can also be an effective way to reduce the effects of lifestyle creep, which occurs when your expenses rise at the same rate as your income. By defining your values, you can be more intentional with your spending. Plus, you’ll get an important insight into the trajectory of your probable retirement expenses while you still have time to build a supporting portfolio.
What do I want to accomplish one year from now financially? How about five years?
This is a great question to ask yourself for a few reasons. First, it helps establish concrete goals or events that need to take place over the next year, giving you a timeline of action items. Remember, you control the actions even when external events mean you don’t entirely control outcomes. Second, if you’ve never thought about your financial goals, the questioning process can be a great way to figure out what you want to prioritize.
Each stage of your life is going to include different financial goals. For example, in your early career, the next big goal might be buying a home or starting a family, both of which require financial planning and choices. In your mid-career, priorities might change to include maxing out retirement accounts or funding your kids’ college.
Once you have an answer and some actionable steps – get them on paper (or into whatever electronic media you prefer). Writing makes the actions real and creates a sense of self accountability. From saving a little bit extra every month, to rebalancing your retirement accounts, to contacting a tax or fiduciary financial professional, each step should have timeline attached.
What’s my ‘enough’?
While it’s commonly thought that more money leads to more happiness, a study from Princeton University suggests the magic number is about $75,000.2 The researchers found that people did not report a greater degree of happiness once they earned more than $75,000 per year.
In a social media connected world we tend to measure ourselves in comparison to everyone else and find ourselves searching for more. So, it’s important to first define and understand what ‘enough’ means to us.
Everyone has their own definition of ‘enough.’ It’s easy to think big and imagine how much money it would take to do whatever you want for the rest of your life.
But, perhaps a better way to approach this question is thinking through what your realistic ideal life looks like. Using the spending numbers you discovered when answering the first question, you can begin to understand the total annual expenses necessary to maintain your current way of life.
Then, dive deeper into the numbers and your values to determine different levels of ‘enough.’ One way to do this is by creating three ‘enough’ buckets:
1. Enough money to cover regular expenses like the mortgage and car payment
2. Enough money to pay the bills and keep food on the table
3. Enough money to live the dream life we fantasize about
If you’ve never thought about ‘enough; this way, you might discover you’re closer than you initially thought. Some common financial wins that signify you’re approaching ‘enough’ are becoming debt-free, consistently saving for retirement, and being on track for current life goals.
When it comes to personal finance, we’re more in control of our future than we often believe. Answering these questions not only gives clarity on what you want, but they can also help shape a path for accomplishment. When you’re intentional with your financial life and plan, you have a greater chance of reaching your goals and finding fulfillment in your money.
1. Office of Public Affairs. 7 Reasons Why Loving Relationships Are Good for You. University of Utah Health. February 14, 2017.
2. Martin, Emmie. Here’s How Much Money You Need to Be Happy, According to a New Analysis by Wealth Experts. CNBC. November 20, 2017.