Creating a Values-Based Financial Plan

Personal values play an important role in many aspects of our lives and have become more prominent recently in how we think about and manage our finances. More and more investors are asking how they can support the causes they care about through their financial decision-making.

Charles Schwab’s latest Modern Wealth Survey found that 69% of Americans say that supporting causes they care most about is a top consideration when it comes to their financial decisions. If you count yourself among them, consider starting with a financial plan to ensure you stay on track toward your long-term goals while also staying true to your personal values.

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Define your saving and spending goals

The best way to start is by translating your dreams into concrete financial goals. Identify your most important goals and commit to saving toward each. Write things down so you can build confidence, stay focused and refine your plan over time while prioritizing both your own financial wellness and the greater good.

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For example, we recently had a client looking for ways to maximize her charitable donations with a limited budget. After pinpointing the causes that she connected with most – the environment and medical research – we laid out a three-year charitable-giving budget. This helped her stay on track with her long-term plan while mixing in creative ways to give back, including ongoing gifts through a donor-advised fund supporting cancer research and volunteering for weekend river cleanups.

I also see this values-based approach in spending habits, with nearly eight in 10 Americans (79%) indicating that they aim to support brands that align with their beliefs. Shopping local, buying secondhand goods, and choosing brands that support environmental and social causes are a few ways consumers make an impact with their purchasing power. Knowing what you need to save toward your goals likewise helps you determine how much you can spend. Armed with that knowledge, you can then spend in a way that matches your values.

Align your investments with your values and interests

With personal beliefs and interests becoming more important in saving and spending, investors are also seeking ways to tie those values into their personal portfolios. Almost three-quarters of American investors (73%) agree that their values guide their investment choices, and most (69%) say that they invest in companies that align with their personal values. When looking at the factors that influence investing decisions, a company’s reputation (91%) and its corporate values (81%) are almost as important as more traditional factors like a company’s performance (96%) and its stock price (93%).

As you build your own portfolio, there are various options to help align your investments to your values. Environmental, social and governance (ESG) investing or socially responsible investing (SRI), are two strategies gaining traction. Additionally, thematic investing, an approach that uses research to identify trends, opportunities and relevant companies and group them into overarching themes, allows you to personalize your investing based on interests and values.

Whether you’re an experienced investor or just starting out, you can use DIY investing tools and resources or work with a financial adviser to invest your money while making a positive difference. Whatever your goals or investable assets, you have choices to ensure you’re on the right track.

Investing involves risk including loss of principal. Diversification strategies do not ensure a profit and do not protect against losses in declining markets.

The information here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The type of securities and investment strategies mentioned may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

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.

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