It Starts With Values
What is one significant purchase that you have made that you regret?
What is one significant purchase that you would happily repeat?
I'm sure you have spent money on something that afterwards you wish you hadn't. Maybe it was some form of retail therapy. On the other hand, you can probably think of a significant expense that you would repeat time and time again.
The relative sums don't really matter either, it is how the purchases have made you feel, positively or negatively. I've spent good money on a digital SLR camera that I never got much value from but spent more on a Peloton bike that my wife and I are loving.
And, because we are all unique one person's regrettable decision might be someone else's most meaningful. Amateur photographers may spend £000s on equipment that they couldn't do without and there will be Peloton bikes around the world gathering dust or acting as an expensive hanging rail.
Our post-purchase evaluation will be based on whether those significant purchases are consistent with what is important to us, our values. When we make purchases that are at odds with our values, if the cost was significant enough, we are more likely to have a poor post-purchase evaluation. However, when purchases are aligned with our values, the evaluation is likely to be positive.
The values that are most important to me, in no particular order, are:
Family
Friends
Fitness
Freedom
I aim to allocate my money accordingly, each month I automatically put money into an account set aside for family holidays which aligns with my family and freedom values. I would also like to have the option to send my children to private school when they reach secondary school age; another nod to the family value. Additionally, I set aside a fairly high proportion of my earnings to my pension and investments because this supports my freedom value and will bring forward the point at which I can choose to work or not. The initial and ongoing costs of the Peloton bike obviously tie into the fitness value.
Once this money is allocated or spent each month it leaves less for other luxury discretionary items but we are OK with that because we don't feel we are missing out. As our disposable income improves more treats may come in. Alternatively, if we find ourselves in a tighter financial spot we may have to redefine our priorities and make sacrifices. We did when I started my financial planning business with zero clients, no money coming in and my wife had been made redundant while on maternity leave with our second child. It wasn't easy but helped clarify what is important to us.
The point is, this list of values is personal to me. Yours may be very different but as long as you are using your money in a way that is consistent with those values you are more likely to be fulfilled.
Self Serving or Self-Sabotaging
Completing the following sentences can indicate whether your beliefs are self-serving or self-sabotaging:
“I am…”
“Money is…”
“I’ll be happy when…”
When understanding what is important to you is the foundation you become clearer on your priorities. Being clearer on your priorities helps make money decisions that you won’t regret. If, on the other hand, your answers to the above questions equate happiness to how much money you have, or your happiness is based upon external factors outside of your control you may find your financial decision-making is not serving you well.
Making better financial decisions enables us to achieve our priorities and live a life consistent with our values.
In short: Values ➡️ priorities ➡️ financial decisions ➡️ fulfilment.
If you leave out the value and priorities your actions and financial decisions are less likely to lead to fulfilment.