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Have you ever made a money decision that wasn’t going to maximize your net worth?

I know I have.  So, why did we make that decision?  Shouldn’t increasing our wealth be our top priority?

As a financial planner, I’ve come to realize two things:

  1. We all express our values with our money.
  2. The goal of money is to maximize our values, not net worth.

First, a story.

I had two clients (husband and wife) that were fun to work with.  They were younger, had kids, and were doing well financially.  In fact, the business that they started and worked really hard to grow had just been sold.  Obviously, my clients did well in the process and were set for life.

This was my opportunity to showcase my skills.  Now that they had this large sum of money it was my job to figure out how to invest it and fund their lifestyles.

But we never got that far.  Over the course of several months and meetings, my clients never implemented any of the options I presented.  On paper, my recommendations were great.  There was income and growth all while making sure taxes were minimized.  Who wouldn’t want that?!

Finally, I got the phone call that they were going to work with a different advisor.  Honestly, I wasn’t surprised.  I was bummed, but I wasn’t surprised.  I felt like we had both been spinning our wheels for months, and nothing I was recommending was being received.

Why did they leave?  

I believe there was a disconnect between what I was advising them to do and what values they were trying to express.  I say this because I know that what I was recommending fit the bill as far as the financial goals they told me.  But their inability to be comfortable with my plan spoke to a deeper level of disconnect, in my opinion.

In short, what they valued was not being expressed with my recommendations.

We all express our values with our money.

Maybe you haven’t received a windfall like them.  But you still express your values with your money every day.  

  • What do you choose to spend money on?
  • What don’t you choose to spend money on?
  • Where do you put that extra money each month?
  • What kind of car do you buy?
  • What hobbies do you pursue?

For me, I can look back at our house purchase as being the best thing we ever bought because we were able to express our values with this mega financial decision.

One of my top values is “simplicity”.  One of my wife’s top values is “independence” (the ability to be less dependent on others for daily living).  We expressed these values when we bought our current house.  Our house is simple, not big, and easy to care for (aligning with my value of simplicity).  Furthermore, my wife is able to express her value of being less dependent on others because we bought a house with a large backyard where she can grow her own food and raise chickens.

At the time of purchase, interest rates were rock bottom, and we could have maximized our net worth by buying a bigger house that would appreciate more quickly.  But that wasn’t our goal.  We are very happy with our purchase because we expressed our values.

The goal of money is to maximize our values, not net worth.

If the goal of money was to maximize net worth, our lives would look a lot different.  Every decision would be viewed through the lens of getting richer.  Sure, we would be a lot wealthier, but we wouldn’t be happier.

What if we chose to maximize our potential net worth and bought a giant house with a small backyard and an HOA that doesn’t allow chickens?  I don’t think we would be nearly as happy as we are today.

In reality, we make decisions that maximize our values, whether we think about it or not.  But there is a balance here.  If we only maximized our values, we could get in financial trouble.

For example, my number one value is my family.  So many of my financial decisions are made with this value being expressed.  While spending all my money on Disneyland vacations would maximize this value, it would also bankrupt me.  So, I need to make decisions that try to maximize my family while having an eye towards my net worth.

This is real financial planning!  If we know what our values are, all the tactical decisions that we make on a spreadsheet can now be viewed through this lens.  The relationship with your financial advisor will be more fruitful, you will make less decisions that you regret, and you will be overall a happier person.

First, discover your values.

The first step to making financial progress isn’t to figure out goals.  Instead, figuring out what you value will be more beneficial to you in the long run.

A values assessment is one of the first things clients do as part of the Stewardship Financial Planning Membership.  But thinking of values can be challenging.  That’s why we have the Value Cards Assessment.  This is a 52-card deck that you can sort through and pick out value cards that resonate with you.

After selecting the cards that describe you, you simply prioritize them in a pyramid, with the most important values being higher in the pyramid.  This simple exercise will help you, your spouse, and your advisor be on the same page as you figure out the whys behind your future money decisions.

If you are interested in financial guidance and resources for advancing your wealth-building journey, visit our Financial Planning Membership page.