What is the purpose of a financial plan? I believe that it’s ultimately a plan for using your money as a tool to live out your best life. Financial plans done right are fantastic at accomplishing this. But unfortunately many plans are missing an essential component. I’m going to be sharing what this missing piece is, why it’s the most important component in actually improving your life, and then I’ll go over some actionable ideas for how you can start incorporating what you’ve learned today into your financial plan. Hopefully, learning this will help you find the motivation to make some important adjustments to your existing plan. Or if you haven’t created a plan yet, hopefully, this will get you started on the right path.
I am not a physician myself. However, I am a financial planner for physicians. Through working with hundreds of physician families, I’ve noticed a common misconception that money in itself will solve your problems and make life better. I was interviewing Dr. Hala Sabry, the founder of the physician mom’s community, on my podcast, Finance For Physicians. She said, “I thought making more money (in practice) would change my life for the better. But in reality, it only made me more of the person I already was. And if I was honest, I didn’t want to continue being that person.” This is such a common experience. Fortunately, Hala was able to recognize this in herself and turn the corner to make the necessary changes. The changes she made are a great example of what I’m going to share today. And she’s living a much better life now as a result.
If the purpose of your financial plan is to help you use money to improve your life, and if money in itself isn’t actually helping, then what is missing? The missing piece is that we fail to pay attention to our values or what’s truly most important to us.
What happens when you’re not keeping your values top of mind? You’re influenced by all the values around you. Think about our cultural values for a minute. Now think about them alongside your values. I’m sure there are major conflicts between the two. One of my favorite quotes articulates this so well. “Don’t tell me what’s most important to you. Show me your checkbook and your calendar, and I’ll tell you what’s most important to you.”
As you start to think about your values, maybe family comes to mind. But you’re also working 80 hours per week and have little or no time to spend with the people you just said are most important to you. You’re saying one thing and doing another. You begin to feel like you’re not being true to yourself. This is called cognitive dissonance, and it’s incredibly common. Many people attempt to use money to solve this problem, but it never works. The good news is you can make a change today. And it all starts with putting your values front and center in your life.
Hopefully by now you’re feeling some motivation to explore your values. Next, we’re going to talk about a brief exercise that will help you get started on this journey. This exercise only takes a few minutes. Completing it will help you clarify your values and keep them top of mind. It’s a huge first step in bringing your actions into alignment with your values and, in turn, seeing real-life improvement. Here are the steps:
Step 1: Take a few minutes to brainstorm what is truly most important in your life. As something pops into your mind, write it down. Think about past amazing experiences, people that you love, and really anything that excites you. Think about what your ideal future looks like. These can be clues into what you truly value. Write down as many possible values as you can think of. There is no wrong or right answer. The more, the merrier.
Step 2: Once you’ve gotten all of them on paper and have a pretty healthy list, the next step is to circle the values you would consider most important. Circle your top 3 values.
Step 3: Grab the second blank sheet of paper and write down the numbers 1, 2, and 3 on the left side. Spread them out evenly on the page. Write down each value in priority order by each number. Underneath each value, write down a sentence or two that provides a bit more context on what this value looks like for you. And then below it, write down specific behaviors and examples of how this might play out in your life. Write down as many as you like.
I’ll share an example of my values. My number one value is relationships. My description of what this might look like is this: Learning to build strong relationships by accepting the love of Christ and, in turn, showing love to others above myself. The examples and behaviors I listed were:
- Daily prayer, bible reading and study
- Building a rock-solid marriage, never coasting, regular date nights
- Leading and loving my three boys, special day with dad on the calendar
- Great friendship + deep conversations = iron sharpens iron
- Love strangers and enemies
After you’ve gone through each of your three values, you’re done! Nice work! This awareness in itself is a huge first step to making great progress. However, I have a few more suggestions that I believe can help you begin to really put these values into action.
You’re thinking about them now, which is great, and you’ve even written them down with some context. But it’s super easy to go back to our routines and totally forget everything. To avoid this, put your values document in a place where you’ll see every day. I have mine folded up in my daily journal. If you’ve got a positive influence in your life that you trust and talk about serious stuff like this, share these with them. This might be a spouse, partner, trusted advisor, or coach.
Let’s talk a little more about the application and bring it back to your financial plan. As a financial planner, I’m often helping clients work through goals, decisions, and life challenges. Ideally you get to a place where your values are the foundation of these things.
For example, maybe you have a goal to be financially independent and retire early (aka FIRE) by age 45. Insteadh of just setting the goal and working on it, please take a minute to peel back the layers. Ask yourself questions about it. Why is this a goal? How important is it, and why? How does it fit in with your values and other alternatives?
Often we peel back the layers and find that the true reason here is a frustration with work. Maybe you’re working extra hard and being as frugal as possible to reach FIRE as soon as possible. But without realizing it, you’re totally compromising on their other values. What if you could instead fix the underlying work issues? What if you could change to working in an environment you love? Would you still be as aggressive with FIRE, or would you be more likely to enjoy more of your time and hard-earned money now?
One of the big decisions that regularly comes up in our work is about purchasing a home. People want to know how to spend on a home. This is a common one where people deviate from their values. Let’s say you’re going into practice and want to purchase a new home and want to know how much you can afford. Maybe your only value is to have the nicest house possible. This is pretty straightforward. Buy as much as you can afford while still maintaining baseline necessities. It’s an easy decision, and you’re living out your values. All is good! In reality, this is not how people actually work. Real people have multiple competing values. And it’s not so simple. If you’re not consulting your values, you’re going to be prone in this decision to get caught up in the emotion and roll with it. Or maybe you make a decision based on rules of thumb or realtor recommendations. Or maybe you’re being influenced heavily by your peers (keeping up with the Joneses) and the culture (bigger is always better). Or maybe you’re becoming more of the person you already are. If you’re a saver, you push for lower-priced houses. If you’re a spender, you go higher.
A much better way to navigate this decision is to consult your values. How does the home fit into your values? What is the purpose of your home? How does buying this home conflict with other values? Is this home in conflict with my values? For example, how does this home affect my ability to retire or travel? How does it affect my current work pressures? The really expensive house will require more work, less time with family, less travel, and later retirement.
Nobody has perfect alignment with their values and their actions. It’s something to work closer toward, but reaching that is never actually possible. This is a lifelong work in process that is constantly changing and evolving. The goal is awareness and improvement over time.
Daniel B. Wrenne is a certified financial planner.