In a few years, we hope to pay off our home mortgage. After that, we’re intending to save up for a parcel of mostly wooded land in the country, then we’re going to build a home on that land.
We’re both using retirement savings vehicles with the intention of starting to use them the day we reach eligibility, around age 60.
We’re also saving money for each of our children in 529 college savings accounts with the intent of paying for some but not all of their college savings.
These are our three big financial goals at the moment. They are the targets for most of our money and they’re the places our money goes when we are frugal or find additional income.
Each of the goals is particularly powerful for us, not because it results in a better net worth or because it amounts to some sort of prestige. These goals are powerful for us because they’re directly in accordance with our deepest personal values.
Our goal of saving for our own piece of land and building on that land is tied heavily to our identification with nature and with rural living. We both want to live in a place with easy access to beautiful natural environments that draws us outdoors all the time. Such living also makes it easier to deeply reinforce family bonds without constant distraction.
Our goal of “retiring” at age 60 is tied heavily to our desire to commit a period of our life to charity and public service and to chasing a few personal windmills. This world has given us so much and we want to give back to it. It’s difficult to do this while having three young children, so we’ve placed this period at a later stage in our life and are doing things now to ensure that it happens.
Our goal of saving for the education of our children is tied heavily to the value we place on education. At the same time, our desire to not pay for their entire education is tied to the value we place on learning how to be responsible for yourself.
It is those deep values that we reflect on every time we make a financial choice that takes us closer to one of our goals.
When we choose not to eat out, we’re giving ourselves more money to pay down our mortgage. Instead, we eat at home. We prepare the meal together, set the table together, enjoy the simple food and the company of each other, and tie together our family bonds.
When we choose to wait before replacing a vehicle, we’re giving ourselves more money to save for retirement. We put a bit more effort into maintaining that car, keeping it out of the junk yard for longer, and the proceeds from that increase our ability to retire at a younger age. Our older paid-off vehicles, driven for a few more years than we might have otherwise liked, aren’t just taking us to today’s destination. They’re also carrying us to the type of second career that we dream of.
When we spend most of our afternoons at the park with our children instead of hooking them on video games or going out for expensive activities, we’re giving ourselves more money to save for their education. We’re building their creativity and their character through imagination-based play and physical play that’s free, giving them a healthier mind and a healthier body.
The connection between the personal values that define who we are and the goals we have set for the future set our actions for today.
It is the reinforcement from both sides of the equation, however, that makes it much easier for us to make good choices today and stay on track for tomorrow.
Let’s say, for example, that we lived by our values but had not set goals for the future. We would still be deeply involved with our children’s intellectual growth, but without the financial restraint we need to have for them to have financial security with their education down the road.
We’d fall into a pattern of buying workbooks and educational tools to help us teach our children things. The truth, though, is that most of the value comes from having an involved parent. I can teach my children how to spell and how to write on any scrap of paper.
We’d fall into a pattern of taking them on expensive educational excursions when almost all of the same lessons can be taught in our neighborhoods and in our state parks. I can teach my children a great deal about nature without an expensive excursion.
We would buy lots of things today to help them along, but the one thing they most need is focused time. I can buy all the workbooks in the world, but they’re not going to be useful unless I sit down with them and impress upon them the value of the workbooks, at which point I might as well be using blank sheets of paper to teach. I can take them on all sorts of trips, but they don’t become valuable without my interaction, and they can get much of the value of many of those trips locally.
The solution is simple. I give them what they most need today – my focused time – and conserve for them what they’ll need for tomorrow – money for their education.
Let’s look at our “retirement” savings under a similar microscope. We could easily spend our time working full-time for charitable causes. The result of that choice, right now, would be an immediate positive impact on the causes we care most about, but it would provide a detriment to many of our other goals in life.
Instead, today we save for our “retirement” thanks to careers and businesses that produce a healthy income.
That’s all well and good, but what about the causes we care about? Right now, my spouse and I both give our spare time to various causes and nonprofit organizations. I’ve served on the executive council, serve as finance director, and have re-drafted the governing documents for a local charity in my spare time. Both my spouse and I have served with various local groups and activities.
We give our time to these groups for several reasons. For one, many of these groups need time as much as they need money. They need people willing to do difficult and often boring tasks. For another, filling some of our spare hours with time spent on such charities means spare hours not spent doing something idle and likely expensive. For yet another reason, volunteering sets a great example for our children in terms of putting your time where your mouth is when it comes to the causes you care about.
The overriding theme here is simple: our values lead us to our financial goals. The goals come from the values, not vice versa.
Earlier in my life, I found it incredibly hard to set financial goals and stick to them. The core reason wasn’t that I couldn’t come up with financial goals, nor that I didn’t understand that I needed plans to get there. The core reason was that I didn’t have a sense of what really mattered to me. It took years for me to really figure that out.
My revelation when I reached my financial low point wasn’t some epiphany about the virtues of savings. It was a simple realization that my family, particularly my children, were at the heart of what mattered to me as a person. I had spent the last few years using my money in ways that weren’t in line at all with that core value of mine, and because there was no real core value behind how I was spending my money, I had neither reason nor desire to save for my future.
In the absence of a core reason to save for the future, it’s incredibly easy to spend money on whatever seems enjoyable at the moment.
My financial turnaround following that realization wasn’t the result of some sort of financial wizardry. It was simply looking at how I was using my money through the filter of that new realization about my life. How is this dollar going to most help my family and my children? I asked myself that over and over and over again.
Over time, my perspectives on a lot of money-related issues changed.
Take frugality, for example.
Originally, I saw frugality as something my parents did and something that I had left behind because of my newfound income. Frugality was boring. Frugality had no role in my life. Frugality simply meant depriving yourself today in order to benefit some unknown future.
When I began to connect the values I held in my life to my goals for the future, I began to see frugality as a tool to help me achieve the goals. Frugality enabled me to shave money from my spending in non-essential places, the end result of which was more money in my wallet and thus more money for the goals I wanted to achieve.
Eventually, though, I began to see frugality in itself as an expression of my values. Being frugal gives me a window to teach my children how to repair a pair of shoes. It gives me another reason to prepare a meal at home for them and to get them involved in the process of preparing it. It gives me yet another reason to have a garden in our back yard that all of us seem to find our way into almost every day during the summer. Being frugal constantly pushes me toward activities where my family is either at the center or involved in some deep way.
It is the deep connection between personal values, goals, and the means of achieving both that makes sticking with those goals seem easy and natural. The goals sprang forth from the values and the methods of achieving those goals often directly express the values that the goals came from. Having all of these elements together makes it easy.
At the core of personal finance is, well, you. It is your values, whatever they may be, that you’re working for. It is the things that are most important in your life that are the real reasons you get out of bed in the morning.
Perhaps you’re aware of those values. If you are, then use them not only in setting goals for your future, but in the methods you use to achieve those goals.
Perhaps you’re not sure why you get out of bed in the morning. If you find yourself there, as I once did, I suggest exploring life and figuring out what really matters to you. Start with things that other people care about: social causes, political causes, religion and faith, family, friendship, personal fitness, leadership. Keep exploring and digging until you wake up one morning and simply know what the important things in your life really are.
Once you have those core values, the goals and the methods to achieve those goals will fit as naturally and with as much appeal as a glove on a cold winter day.