Does Your Financial Plan Fit Your Core Values?


Should I be saving for my child’s future education or saving for my retirement? Should I pay down my lowest credit card debt or the one with the highest interest? Should I rent out my house or just sell it?

All these questions have logical answers that you can find by looking at the numbers. But when it comes to financial decisions, the logical answer isn’t always the right one.

Consider the credit card question. Say the person just needs one “win” to get the ball rolling. To them, paying off the smallest debt provides the sense of accomplishment they need to tackle the rest of their debt. Sure, it’s not the most efficient strategy, but it might be the best decision for them.

The problem is that too many people think financial decisions are just about the numbers. They fail to consider their core values when deciding what route to take, which can result in a few problems:

  1. The investor avoids the decision altogether.
  2. The investor makes a lackluster decision and fails to follow the plan because it’s not motivating.
  3. The investor follows the plan and then ends up unsatisfied in the long run because they eventually realize their core values aren’t satisfied.

The great baseball player Yogi Berra summed this up in one great line: “If you don’t know where you are going, you’ll end up someplace else.” Without considering your core values when making financial decisions, you probably won’t end up where you want to be.

Your Core Values Are Not Your Financial Goals

When trying to name your values, you might point to your financial goals. But those aren’t your core values.

Core personal values serve as guiding principles in a person’s life and can be applied across contexts, one of which can be our financial decisions.

Research by Shalom Schwartz features a list of basic values that people often prioritize, such as achievement, security, benevolence, and self-direction. But that doesn’t mean you have to be constrained to these items—with a quick Google search, you’ll find multiple lists floating around (but try sticking to credible sources).

In the context of financial planning, your financial goals are a means to an end, and that end is your core values. In a way, your core values can be used as a weeding tool when considering your financial goals.

Each financial goal must serve that ultimate purpose. If it doesn’t, then it may not be worth doing.

How to Uncover Your Core Values

Now, let’s get to the practical side of this topic: How can you uncover your core values? There is no one magic button, but there are plenty of exercises that one can engage in to begin uncovering what is truly important.

  1. Ask the right questions: Try answering questions that push you to think more abstractly about money-related topics. For example, try answering, “What is important about money to me?” Once you provide an answer (for example, “It allows me to go on vacation”), ask yourself why this is important. For example, “Why is taking this vacation important to me?” Keep digging a little deeper for a few rounds, asking yourself “Why?” These latter answers will give you insight into your true life motivations and may help you get closer to your core values.
  2. Try using an existing framework: In a previous project, we tested out a process that depends on an existing framework from the field of positive psychology. This framework posits that well-being is composed of several components: positive emotion, engagement, relationships, meaning, accomplishment, and vitality, also known as PERMA-V. We found that asking individuals to consider the PERMA-V framework within the goal-setting process helped them identify goals that were closer to their life values. (You can learn more about this process here.)
  3. Let your emotions guide you: In his book Give Yourself a Nudge, decision-making master Ralph Keeney gives a few suggestions on how to uncover your core values. One technique encourages the person to acknowledge and articulate the emotions and feelings the decision evokes. For example, if the thought of slogging through years of payments to tackle your highest-interest credit card makes you want to quit before you even begin, try to understand the source of that abhorrence. In this case, maybe one of your core values is achievement. That could mean that tackling a smaller debt payment may be a more motivating and effective starting point.

Aligning your financial plan to your core values may seem daunting and unusual, but it’s an exercise worth doing. Chances are that this process might make your financial plan look a little different from others because your plan will be positioned for your unique core values.

Having a plan that is aimed at achieving your core values, and the financial goals that serve them, may help you better stick to that plan and avoid regret while you are at it.


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