It all starts with a pack of postcards I bought on Amazon for five bucks. When I sit down with a new client, usually a married couple, I take out my postcards and lay them on the table. The exercise: Pick five of these that represent the life you want.
Beach, hammock, grandkids, cruise ship — these images are pretty common choices, but each comes with its own flavor.
One client wants to pay for his grandkids’ education; another wants to travel through the cathedrals of Italy; another wants to leave a vibrant, low-debt business for her longtime employees. Different stories for different clients.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
These stories are dictated by values, which also influence our daily behavior. Our values make us who we are.
If your parents hammered away at the idea of being debt-free, you may have learned similar traits. Grow up in a traveling family, and you’ll probably invest in showing the world to your own kids. Watch your role models take pride in charitable giving, and you will probably follow suit as an adult.
These values are woven into who we are, and knowing what you value — which postcard you pick — is vital to your financial strategy.
Your values tell you why you act the way you do and how to optimize your plan for the future. Knowing your values will make your plan more “keepable.”
Know Who You Are
Do you find yourself shopping for the most cost-effective vehicle and the next day leaving on your second all-inclusive cruise that month? Do you find yourself counting pennies at mealtimes and clipping coupons for the grocery store, then the next day buying a vintage car (leather seat covers, of course) on impulse?
OK, maybe those are extreme examples, but where you save money and where you spend it comes down to your values, which are unique to you and may not make sense to others.
Know Who You Want to Be
“Aspirational values” tell you who you “aspire” to be. More than wishful thinking, they also tell you about yourself.
If you feel drawn to donate to a wildlife preservation group, even if you never have, you’re experiencing your values. Your aspirations, like giving to an eco-friendly cause, still paint a picture of who you are, and how you might want to invest.
By that same right, you will probably not want to invest in a company with slack environmental policies. By doing so, you’d experience discomfort from your values, which could make that investment more trouble than it’s worth in the long run.
Know What’s Possible
Knowing yourself can also help you plan for what’s possible. Some of us are natural savers, and some of us are natural spenders. As for me, I’m a natural spender, especially when it comes to relaxing with those I love or seeing a part of the world I’ve never explored. I know myself, and I know that I’ll splurge on that trip or that expensive meal, even when it might not be strategic to do so.
Knowing that about myself, one practical step I take is to set up automatic savings. With a few clicks, I automatically take a piece of my income and put it in savings, investments and retirement. I don’t even see the money, and (after a while) I don’t even feel the loss.
By understanding yourself, you have a hold on what’s realistic in your financial life. You know your faults and where to create an intentional outlet to express yourself financially.
If you know you’ll want a big celebration for your 20th anniversary, plan for it! Build the cruise or the lavish stay-cation into your budget for the year rather than overspending when the big day comes.
If you know you have a tendency to disregard distant future events like retirement, set up strict guidelines that will help you make this possible. Set up an automatic withdrawal from every check, put the money in a 401(k) that will be difficult to draw on, and budget from your take-home pay after all this is done, not from the salary on your job description.
Know Which Postcards You’d Pick
“Just making money” is an unreflective, oversimplified reason to work with your finances.
Over the long haul, your investments will reflect something deeper. Your values will show in how you spend and save, what makes you happy, and what keeps you up at night. It’s best that these financial values aren’t a surprise to you.
A values inventory can help clarify your core values, which in turn can help you develop a plan with an adviser. Values assessment tests range from the simple and free (opens in new tab) to the complex and expensive (opens in new tab).
You are going to be you for a long time! Your long-term investment strategy should be based on your strengths, weaknesses and driving values.
The postcards I give my clients aren’t pictures of piles of money and ascending trendlines, they show families making memories, places you’ve never been, and people and causes in need. Your postcard choice reflects part of who you are, and the choices you make with your money should do the same.
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
-
-
Trusting Fintech: Four Critical Moves to Protect Yourself
A few relatively easy steps can help you safeguard your money when using bank and budgeting apps and other financial technology.
-
Four Ways Women Can Take Control of Their Financial Health
Adjusting for life events, taking advantage of workplace benefits and preparing for caregiving can make a big difference in your financial future.
-
Trusting Fintech: Four Critical Moves to Protect Yourself
A few relatively easy steps can help you safeguard your money when using bank and budgeting apps and other financial technology.
-
Four Ways Women Can Take Control of Their Financial Health
Adjusting for life events, taking advantage of workplace benefits and preparing for caregiving can make a big difference in your financial future.
-
Can a Potential Employee Negotiate Conditions of Criticism?
Labor lawyer weighs in on whether job candidate with traumatizing childhood can request that prospective boss curb his management style to avoid triggering her.
-
Long-Term Care Insurance Quandary: Keep Paying or Let It Go?
As long-term care insurance premiums go up, many policyholders are struggling with what to do. Accept higher premiums, reduce benefits, let the policy lapse or take a payout?
-
Four Steps to Prepare Your Finances for Divorce
Divorce is rarely easy, but getting financial paperwork in order, working with professionals and making tough decisions now can take some of the stress out of it.
-
In Retirement, Many Crucial Questions Start With the Word ‘When’
For a secure retirement, make sure you know the answers to all of these “when” questions.
-
Rise of ChatGPT Could Be a Boon for Savvy Business Owners
Our ChatGPT obsession reflects the limitless potential of artificial intelligence. Businesses that get with the program now could quickly reap the benefits.
-
Why So Many Experts Consider Annuities a Win for Retirees
Rising interest rates, pressure on Social Security, unpredictable markets and longevity risks are making annuities ever more attractive as a part of retirement planning.
