The Best Financial Plan is Not Based on Money

person working on best financial plan

If you ask most people “what is the basis for the best financial plan?”, odds are extremely high they’d respond that it would be based on “money”, or “finances” or “investments”, etc. Sadly, you might get that same sort of list if you asked a lot of financial advisors. Too many people are subliminally trained by our culture to immediately think of money as a goal. It’s not – or at least it shouldn’t be if you want to live anything close to a happy life. Money is simply a tool.

The best financial plans are based on your values. What you value is the basis for a truly great financial plan, whether it’s something you have now and want to maintain, or it’s something you want to attain later. Values are those things which are most important to you.

Now many financial planners will start with an assessment of your “goals”, but even this misses the point. Goals don’t address the why behind your financial plan, the “why” you’re going to have the discipline to take action, to save, to invest. Even goals themselves, if they’re not tethered to something more important which reflects your core values, will be hard to sustain the tough times that are inevitable in life.

You can set a goal to save 10% of your salary, and that’s fine. It might even be the right thing to do. It will be an easy thing to do when times are good and tougher to do when things get a bit tight. That’s when most goals fall apart. Just think about all the New Year’s resolutions that are made and then broken within 30 days. Goals are tangible results you seek at various points along the way, but values are the ultimate prize and are what make the goals worthwhile.

What Are Your Values?

We’d like you to engage in a thought exercise with us, just to illustrate the concept here. We want you to begin the process of establishing a values hierarchy. Essentially, this is a series of questions to ask yourself. Each answer leads to another question until you really can’t answer anymore. Only when you have totally exhausted answering – and this might require a couple of sessions – will you know that you have finished your hierarchy. So, get a piece of paper to write down your hierarchy, and let’s begin.

Values Hierarchy – Step One:

Ask yourself, “what’s important to me about money?”

This first question is very specific. It includes the qualifier “to me” and the object “money”.

Write down your answer on the piece of paper. Let’s pretend you answered free time.

Values Hierarchy – Step Two:

Now ask yourself, “what’s important to me about ?”

This second question (and all the others) includes the qualifier “to me”, but it focuses on the previous question’s answer.

In our example, your second question would be, “what’s important to me about free time?” because “free time” was the answer to your first question.

Write down your answer to the second question on the piece of paper directly under the first answer.

Values Hierarchy – Step Three:

Now ask yourself, “what’s important to me about ”

Write down that answer on the piece of paper directly under the second answer.

Values Hierarchy – Step Four:

Repeat this process until you cannot possibly find another answer.

By the end of this exercise, which might require you break it into several sessions over a couple of days, you will have your values hierarchy. For most people, the list should be somewhere between 5 to 20 long. There is no perfect length, but we’d suggest that 3 or less means you aren’t giving yourself permission or enough time to really think deeply about this.

The first answers are usually the easiest, and they are almost inevitably the lower values answers. These are values which mean something else, something deeper and ultimately more important to you. The last answers are almost always the highest values. These are the things which make life worth living, which establish the “why” behind a financial plan and thus provide the sustainability to many of your goals. When you understand the “why”, you are exponentially more likely to do what it takes to accomplish the goal. The goals, of course, derive from a financial plan which reflects your higher values.

An Example From Life

This concept was recently included in the makeover of the U.S. Marine Corps’ basic training program. As reported in Charles Duhigg’s book, Smarter, Faster, Better, Brigadier General Charles Krulak faced the challenge in 2010 of totally revamping the marine’s training regimen to improve the quality of graduating recruits. One of the key areas of his focus was on improving motivation. As a result of the overhaul, recruits are now constantly asked “why” they are doing something. The right answer is always the one which reveals and reinforces the proper motivation.

One noteworthy story in Duhigg’s book is of a young recruit named Quintanilla. While Quintanilla had successfully progressed through 12 weeks of basic training, he faced one last challenge course to graduate. At the very end of that course, on the last obstacle which was designed to be the hardest, he was starting to falter. He was not alone in this; the last course is designed to drain the recruits of energy, sleep, and stamina and to test if they have what it takes to make it. As training continued, they had been instructed to ask one another “why are you here?” Quintanilla’s answer was “to become a better Marine…” which wasn’t really quite enough, especially within earshot of a drill instructor. But Quintanilla caught himself and added, “… and to build a better life for my family.”

That was the correct answer because that was the answer which articulated a higher value and could sustain the goal in the face of an incredibly hard challenge. The story’s happy ending – Quintanilla finished the challenge course and earned his Eagle Globe and Anchor. Don’t know what that means? Ask a Marine the next time you see one, and thank him or her for their service while you’re at it.

Higher Values Define Your Finances

The point here is that the higher values are the ones which reveal and define your purpose in life and then provide the basis for smart decisions about how to use the tools you have available – money, finances, and investments, etc. The first step in any great financial plan is to establish these values and to put them into a hierarchy.

At First Financial Consulting, we are committed to values-based planning. Clients don’t come to us just to “get rich”, “make money”, or “become a gazillionaire”. They come to us for help in achieving what they see as their higher purposes in life. Yes, money, investments, etc. are part of that. But we put them in their proper place as tools not ends in themselves. As a result, our clients are better prepared to weather the inevitable storms of the stock market, the economy, and life in general. They rely on a great plan derived specifically from their vision for their future. We truly believe our clients’ futures are brighter because of this focus.

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