Updated on 01.31.07

31 Days To Fix Your Finances, Day 2: Defining Your Goals From Your Values

Trent Hamm

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.

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  1. Terry says:

    I have middle class values (e.g. I want to buy a home) and a minimum wage income. My minimum wage income does not afford me the ability to pay for education or training which might in turn afford me a middle class income.

    Thinking outside the box by necessity, I am seeking to resolve this problem from a different angle:

    Is it possible to build housing which someone earning minimum wage can buy and own? (I came up with the idea of “SRO condos”, which, according to Google, some local political candidate in California also came up with several years ago. I also think a cluster of small cottages, which could be owned individually, might also be feasible.)

    If it is possible, that is what I want to do.

  2. Amy says:

    So far, I’m getting a ton of value out of your series – congrats on taking the time to put your thoughts and advice together so clearly. A quesiton for you, however, about your wife & marriage. You mention your values, your goals, but not the role – if any – your wife played in defining your goals. Or, whether you and your wife have discussed your individual values and where they align or conflict. As I did the first exercise, and now the second, it’s becoming clear to me that my husband and I have not articulated our goals and underlying values on paper together – and that’s probably the source of our spending/saving/investing conflict. How do you and your wife work together on your values/goals?

  3. Trent Hamm Trent says:

    Amy: I try to avoid discussing financial issues that directly involve my wife on The Simple Dollar. However, I will say that when I do exercises like these, my wife and I usually do them in parallel, then talk about them together and combine them.

  4. Pauline says:

    I agree w/ amy. Husband is a car freak. Auctions are dangerous! How to get spouse to take your need for financial security seriously w/o saying “You better take this seriously” which of course never works. Better to bait a bull with red cape! I want to involve my husband in planning while we are still young and kid-free, lest we end up under the gun or dangling over a financial precipice. I haven’t figured that one out.

  5. rob in Madrid says:

    This has been a very interesting exercise. One of my values is/are Fun Adventure Excitement Enjoyment.

    Hmmm shopping is all of the above, spending money is fun, going away on a shopping vacation is a blast (yes I’m a guy) nothing makes one feel better than buying an expensive toy!

    Kind of defeats the purpose doesn’t it.

    OK freedom from Debt means we can enjoy the Fun Adventure Excitement Enjoyment values.

    Freedom from debt means I can turn down work during the summer. (I’m an ESL teacher)

    Freedom from debt means we don’t have to worry about cash flow crisis.

    Freedom from debt means my wife can turn down a promotion and relocation and not worry if it means unemployment

    Freedom from debt means less worry and fears about the future

    OK I get it now.

    Pauline dealing with money is the most difficult challenge that every married couple faces, far more than sex kids work. Its not an easy thing to work out. The only answer I have is to find resources on how to manage money as a couple.

  6. arthur asilo says:

    I was inspired by RK rich dad poor dad, It is not perfect but good enough to prod me into financial self-studies, which led me to this site. Nothing is perfect although I like my chances in improving by keeping my mind open to good avice like these. thanks man!

  7. Davey says:

    I also was inspired by Rich Dad to get my act together, I’m 27 and was just recently married. Being a musician, I haven’t really thought too hard about this kind of stuff before, but now I’m even doing a business studies course at open university…”he’s changed” they’ll say.

  8. Betty Ann says:

    This is terrific……I’m going to start this for January 1, 2008 .. and go through one step a day; since I missed it last year..

    What a great thing to focus on Values First.

    I got my main 6…

  9. Marcelisa says:

    I’m inspired by this 31-Day program. Thank you for putting it together.

    I spent a bit of time paring down my primary values to just six (I added one more than you instructed). I’m having trouble coming up with goals for 3 of my six because they are more abstract: excellence, clarity, and intelligence(very similar to education, another primary goal). What would you suggest? Should I set goals for my secondary values instead? Some of them are liberty of time and money; adventure; and love.

  10. Michelle says:

    We just recently accomplished three major goals which was buying our first home and being supported solely from my husbands’ income and having a second child. I was working from home in my other job, but Apartment managing is demanding and my husband wants me to have a choice about working. The budget is much tighter and even though I don’t have a steady income I still work as hard if not harder. We dropped a car and have kept the one we have in good running condition because it is cheaper than buying a new one. My husband commutes by bus and train and I am walking my son to school as much as I can after recovering from delivery 7 weeks ago. We garden and avoid eating out and as far as improvements in our home we do as much as we can and avoid spending beyond our means. We are successful thus far because we do take time to talk about our values and goals and what we care about now and what we hope to accomplish in the long, long run and the long run and even what we hope will happen in a short time. We are not perfect but we talk to each other and trust each other and because of this we know where to have room for allowances and where we should rein it in. For example, I could live with out internet (probably because I have the time to go to the library), but my husband really feels a need for it. So we have it and use it for our entertainment instead of going out to the movies. In a way it does save us a lot of money and is a great immediate resource of information as well. My husband doesn’t need new clothes often but since I have a changing body due to pregnancy and delivery I do need to shop. I do try save where I can though so I have been going to the thrift stores and saving a lot. We both like good food and while we don’t eat out often we will occasionally and sometimes we will make a good meal that costs a bit more for the ingredients (cream and cheese) but is still a fraction of the restaurant price and yet restaurant quality.

    To those who asked about involving their spouse on financial planning, I would say that you definitely should. One of the major problems that come up in marriage is money and lack of communication. Spencer W. Kimball said the cause of all (yes 100%) divorce is selfishness on one or both sides.

  11. Jessica says:

    So far so good.
    I have wrote down my values, and defined my goals (both 25 and 1 year goals). I have really enjoyed the process of delving inside my soul and write down ‘on paper’ things I know I want and can achieve. This is a really small action but I am proud I have done it. My only hope now is to stick to the program for the next 29 days. I want to, so will try hard to… I’ll keep you posted

  12. Lui says:

    The resources from your site are very useful. Especially for someone like me just starting on my financial education. You’re down right right on the first step. Until now, it haven’t occurred to me that I need to clarify my values to really know what I want to get out of life. I always rationalizes that its in the back of my head all the time. I listed down ten at first and eventually narrowed it down to four. I realize now why I’m not going anywhere in terms of managing my money. It’s because my spending habits and patterns do not support what I really value in life. Whew! You can’t imagine the eureka moment I had on that one. Thank you for sharing your knowledge and making it simple for ordinary guys like me. I hope to see you and thank you personally someday. More power! May your blessings multiply.

  13. new_student says:

    Previously, the question about conflicting goals with your spouse already came up. However, I have currently the problem that I am in conflict with myself – some of my goals appear mutually exclusive!

    This is not a problem with my values, but the resulting situations are different life situations. The post mentions something about conflicts between goals and mismatching values, but not about goals conflicting with each other (especially when the values are not obviously conflicting).

    Anybody has experienced this problem and has some insight?

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