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.
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.
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.
Erin Wood is the Senior Vice President of Financial Planning at Carson Group, where she develops strategies to help families achieve their financial goals. She holds Certified Financial Planner, Chartered Retirement Planning Counselor and Certified Financial Behavior Specialist designations.
Increasingly, Red States Embrace Marijuana: The Kiplinger Letter
The Kiplinger Letter Ohio becomes the 24th state to legalize marijuana for recreational use via a voter referendum.
By Sean Lengell Published
Charlie Munger of Berkshire Hathaway Has Died
Charlie Munger, vice chair of Berkshire Hathaway, died Tuesday, the company confirmed.
By Alexandra Svokos Published
The Best and Worst Ways for Retirees to Give on Giving Tuesday
Cash donations are certainly the most convenient, but you could be overlooking significant tax advantages by taking the easy way.
By Evan T. Beach, CFP®, AWMA® Published
From Breadwinner to Retiree: How to Manage the Transition
Many people arrive at retirement with mixed emotions, including anxiety. Making the transition involves a profound shift in your mindset.
By Erin Wood, CFP®, CRPC®, FBSⓇ Published
It’s Giving Tuesday: Charity Strategies the Wealthy Can Apply
When markets are down and interest rates are high, philanthropy can take a hit. Here are some ways that affluent consumers can make the most of their charitable giving.
By Karen Harding, CFA Published
Looking for a Job? Here’s How Not to Get Hired
A pair of HR consultants offer some advice to help people heading out on interviews to land that job.
By H. Dennis Beaver, Esq. Published
Three Ways to Protect Your Retirement From Sequence of Returns Risk
Retiring in a down market doesn’t have to ravage your retirement, but safeguarding your savings requires planning well in advance.
By David McGill Published
Single-Premium Insurance: A Different Way to Pay for Coverage
Single-premium programs enable you to pay future annual premiums on an existing or new policy by purchasing a single-premium immediate annuity (SPIA).
By Stefan Greenberg, CFP®, CFS, CLTC Published
Six Charitable Giving Strategies: Feel Good and Cut Your Taxes
These strategies can help you spread the love even more to charities you trust while also taking advantage of different kinds of tax benefits.
By Marguerita M. Cheng, CFP® & RICP® Published
Four Reasons to Rent When You Downsize for Retirement
Renting is great when you want to test-drive a location, or you want more predictable costs. It might be easier for family relationships in the long run, too.
By Evan T. Beach, CFP®, AWMA® Published