The Simple Dollar offers a month-long plan for fixing your finances. All you need is an open mind and an hour each day.

Yesterday, we defined five main values that define our life. These values are what we live for; they drive us to work and generally guide us in how we spend our lives.

Yet so often we find ourselves betraying these values (everyone does this at some point), and it is when we choose to betray these values that we find ourselves in financial trouble instead of in financial stability. We either spend money on things that don’t match or even oppose our values, or we spend money on our values but in a misguided fashion.

Why do we do this? The biggest reason that we spend money out of accord with our values is that we don’t sit down and define our goals. Goals are merely the specific embodiment of our values - tangible milestones that are clear indications of lives lived in tune with our values.

You’re probably thinking to yourself, “I have values and goals already - this is a waste of my time.” Before you log off, I want to ask you one simple question: first, do your goals actually match the values in your life? Let me give you an example. One of my major short term goals is buying a house, something many of you can identify with. This is a goal related to one of my primary values, my family. Thus, I’m buying a house for my family. Understanding this connection lets me clearly define what type of house I’m looking for (it doesn’t need to be shiny and new, but it does need to have space for my son and my future children - a large kitchen, a family room, and four bedrooms are what I seek). Thus, every time I think about the home purchase, I realize that I’m working for my family.

If you can honestly match ever single goal in your life with one of your central values, you’re more well-adjusted than almost everyone in the world. The truth is that we all have central values without any associated goals, goals without any associated values, and goal-value pairings that are really unclear and muddled. People that are financially successful find ways to minimize all of these.

How do they do this? They define all of their goals based directly on their personal values, and they live their lives to meet these goals above everything else. If they go to spend money, they ask themselves whether that money directly leads them to one of their goals. If the answer is no, they don’t spend the money. Thus, when they actually spend money, it doesn’t fill them with guilt. They can immediately see how that money is going to realize their goals, which are fundamentally connected to the values that define their life.

How do we get there? Let’s take an hour, sit down, and define ten goals in our life. If you went through yesterday’s exercise, you will already have a list of the five values that are central to your life. Now, we take these values and use them to define ten concrete goals.

First, forget what you believe your goals are right now. You might end up coming back to these goals during this process or you might not. The intent is to define your goals in direct harmony with your core values.

For each value on your list, ask yourself where you want to be in terms of that value in twenty five years. I mentioned that one of my main values is my family (specifically my children), so in twenty five years, I would like to have two college-educated children starting stable lives on their own, and perhaps a third in college.

Now, turn that dream into a goal. For my children to be able to start out their own lives on their own, I want to minimize their college debts and set a good example for their lives. So, my goal is to be able to pay for at least part of their education.

You might be tempted to start writing a plan for that goal right now, but don’t. We’ll get to that later. Right now, we just want to make a list of long-term goals that match your values.

For those curious, here are my goals for twenty five years down the road:
+ I want to be able to pay for a significant part of my child’s college education
+ I want to have a fully paid for house big enough for my grandchildren to visit and feel comfortable
+ I want to be able to travel the world with my wife
+ I want to have three books in print
+ I want to be able to live off the interest of my non-retirement investments

Once you’ve made the long term goals, go through your values again and ask yourself where you want to be in terms of that value in one year. Just like before, figure out where you would like to be in relation to that value in one year and don’t worry about defining a plan for that goal.

Again, here are my one year goals:
+ I want to double the value of my son’s 529 college savings plan
+ I want to buy and move into a house
+ I want to select and begin learning a foreign language
+ I want to quadruple the readership of The Simple Dollar
+ I want to reach $10K in my non-retirement mutual fund account

Now that you have these goals, we’re ready to begin defining some plans … but let’s sleep on it first.

Ready? Let’s continue on to the next day.