Only a few short years ago, I would have scoffed acerbically at the thought of documenting and attempting to live by any sort of personal values. I suppose that I had worked for far too long in the corporate world where significant time and money is spent on generating values, vision and mission statements, having them plastered around the workplace, only for them to be largely forgotten or ignored.
This changed in 2019 when shortly after my position was made redundant, I took time to dig quite deeply into my existence and take stock of where I was in life. I realized three things:
- That I had been generally living my life on autopilot, following common wisdom without assessing if such wisdom made sense for me.
- That despite this, I found myself in a pretty good place. I had seriously traded up by marrying Monique and we were in a reasonable financial position
- That, if I choose to start living in a more purposeful way, I will be able to escalate my life in so many positive ways.
A little later, I understood that how I managed my finances was a key component of my purposeful life. Enter our personal money values.
Table of Contents
Why we Need Personal Financial Values
It’s impossible to live a purposeful life without some guiding principles. So, I went about drafting what I wanted from my new, more purposeful life. What became almost immediately apparent is how important personal finances are to our lives.
Money itself is not important, rather what matters is what money allows you to do and how it funds your lifestyle, purposeful or otherwise. Obviously, our lifestyles have to be funded, whether from income, investments, savings or some combination of these. And then, it’s not just about the here and now, as we also need to keep one eye firmly on the future.
So important are personal financial money values, that while they have to be produced after you identify the guiding principles for your life, that they can become in themselves practical life principles.
We found that when we started living by our money values, a purposeful life just seems to happen of its own accord.
Get Your Partner Onboard
Finances are always reported as one of the primary reasons for divorce, and there is zero doubt that conflict over money matters can cause massive strain to any intimate relationship. If partners differ widely on their attitudes towards and behaviours around their finances, their relationship may be doomed from the outset.
Documenting personal money values can be extremely helpful in itself. The simple act of discussing financial principles and writing them down will usually identify major differences and allow the couple to work towards an agreement with which they are both happy. If you have a clear understanding of your partner’s financial values, it will be easier to be empathetic when he or she makes a money decision that seems crazy to you.
Of course, this only works if there is transparency and trust in your relationship. For some, the only way to deal with wide differences in financial values is to hide expenditure from their partner. In the long run this will result in conflict, mistrust and potentially mark the end of the relationship.
We realized that we needed to combine our financial affairs. While this wasn’t easy for us, and it didn’t happen overnight, we eventually merged our finances and accounts, and track all expenditure in a budgeting app. We believe that this has made our marriage stronger.
What if You and Your Partner’s Personal Money Values Differ Widely?
Once you clarify your personal money values, you may find that your partner’s values are significantly different, especially if your relationship is still relatively new. What can you do if you find yourself in such a relationship?
I have to be honest that this is tough for me to answer, as I have never been in such a situation. So, I decided to speak to some couples who seem to flourish despite seemingly very different attitudes towards their personal finances. They consistently identified three key principles:
- Identify, acknowledge, and accept your differences.
- Maintain some degree of financial independence. There are different ways to achieve this such as allocating income into a central pool to pay bills, add to savings or invest, with the rest left with each to spend as he/she sees fit.
- Be open and transparent. Relationships seem far more able to survive honest conflict than dishonesty and deceit. If you are responsible for paying the electricity bill, devise a system so that this information is shared with your partner.
While these seem to have the potential to combine to a workable way forward, it must be incredibly tough to navigate the additional stresses placed on a relationship by conflicting personal money values. If this is you, good luck!
How to Create your Personal Money Values.
As I mentioned earlier, for most of us money is simply a tool that allows us to fund the lifestyle that we want for us and our families. Therefore, the obvious place to start is by identifying what you want from your life of purpose. In a previous post I described how to create your happiness statement, and if you haven’t previously documented what you want from your life, maybe you could start by doing this, it won’t take long.
If you want to take a deeper dive into establishing your life’s priorities, PositivePsychology.com has an excellent article that is both thought-provoking and practical titled “How to Set and Achieve Life Goals The Right Way.”
The next step is to decide how your finances will support the way you will live your purposeful life. If you have decided that you want to spend significant time with your children and attend all their important events, you may have to change how you earn your money; that 80 hour a week job just won’t cut it. This, in turn may need you to reduce your expenditure. Alternatively, you may decide that you want to free yourself of debt and this could mean working longer hours or setting up a side hustle.
Our Personal Money Values
We have identified and agreed five personal money values that we share:
- We believe that financial freedom is possible
- We know our numbers
- We leverage our strengths to create income
- We keep lifestyle creep in check
- We convert income into assets
Let’s look at each of these in a little more detail. Our first is unapologetically attitudinal. It’s a belief that underpins all our other money values, that financial freedom is possible. This first money value includes these three building blocks:
- We refuse to live pay-check to pay-check
- We focus on our plan to be financially independent
- We can be more generous with others if our needs are looked after
Our second money value, in contrast is entirely pragmatic. Only by knowing our numbers is it possible to achieve financial freedom, unless we win the lottery, of course. The key numbers for us are:
- Our expenditure, which we measure through strict use of our budgeting app.
- Our wealth, at the end of each month, we calculate and review our net worth.
- Our income, what we have coming in each month
- Our emergency reserve, both what we actually have and whether it’s enough to meet changing needs.
The remaining three values govern our behaviours in ways designed to achieve our overall goal of financial freedom. In terms of leveraging our strengths to create income it means having multiple income streams, both active and passive. This not only increases what we earn but helps insulate us from decline or loss of any individual source of income, such as being made redundant.
It’s very easy for our expenditure to expand in line with our income or, even worse, our ability to qualify for easy credit. If we have the ability to spend money on something that truly adds joy to our lives, then that’s fine.
Otherwise, we try to maintain the same, relatively modest lifestyle as our income increases. We also live within our means, and we ferociously avoid debt.
Finally, we focus on converting our income, or at least part of it, into assets. We have a plan, which we follow that is designed to ensure that we maintain and increase wealth. I also strive to constantly improve and upgrade my financial literacy, and few days go by without me reading an article or book about personal finance. Currently, I am engrossed in How I Lost Money in Real Estate Before It Was Fashionable by JL Collins, who also penned the fantastic and highly recommend The Simple Path to Wealth.
The more that I learn, the more I realize that personal finance is relatively simple and that we don’t need to employ expensive experts to overcomplicate it for us. For us, documenting and largely living by our personal money values was a game changer. They give us a focus that has significantly improved the way in which we live more purposeful lives.
Do you have some form of guiding money values or principles? If so, how did you come up with them and how do they differ from ours? If not, are you now considering creating your own soon? I really would love to learn from you.
Author
Nick Abbott
Hi, I’m Nick. Visiting foreign countries has been an important part of my life since my parents moved to Kano in Nigeria in 1977. Since then, as both a military officer and in later jobs I have enjoyed the huge privilege of being exposed to many different countries and cultures.
I am delighted to be able to support my wife Monique and Yes2Yolo primarily by contributing travel articles, providing editing and proof-reading services and being a general sounding board.
Very insightful article!
Thank you so much Michelle.