What are your financial values?
Your financial values are the beliefs that guide how you handle money. They shape how you earn, spend, save, invest, and even donate. Think of them as your personal financial compass.
Understanding your financial values is key to achieving greater financial well-being and satisfaction. When your financial decisions align with what truly matters to you, you’re more likely to experience long-term financial success and less stress along the way. So, let’s explore what are financial values and why they’re so important.
Core financial values
Your financial values are the beliefs that guide your financial decisions. They influence how you earn, save, spend, invest, and give away your money.
Here are some core financial values you may hold:
Security and stability
If you value security and stability, you probably want to feel financially safe and have a predictable income. Saving, buying insurance, and choosing low-risk investments are all hallmarks of this value.
You might choose a stable job with good benefits over a higher-paying but less secure one, or you might avoid speculative investments that could jeopardize your savings.
Freedom and independence
If you value freedom and independence, you want to be able to make choices without financial constraints. Building wealth so you can retire early or pursue your passions may be a priority.
You might invest in real estate or start a business to generate passive income, or you might save aggressively to achieve financial independence at a young age.
Enjoyment and experiences
If you value enjoyment and experiences, you probably want to spend your money on travel, hobbies, and leisure activities. You may focus on maximizing your current enjoyment rather than long-term accumulation and prioritize experiences over material possessions.
Taking frequent vacations and spending money on entertainment might be a way of life, and you might prioritize quality of life over saving for the future.
Other important financial values
Beyond the values mentioned above, there are other financial values that people hold. These values often influence how they manage their money and make financial decisions.
Family and relationships
Some people prioritize the financial well-being of their loved ones. They might want to provide for their children’s education, support their aging parents, or leave an inheritance for future generations. Their financial decisions are often made with the entire family unit in mind.
For example, people with this value might prioritize life insurance and estate planning. They might also save for college funds or help family members in need.
Generosity and giving
Others value charitable contributions and supporting causes they believe in. They see money as a tool to make a positive impact on the world and may prioritize donating to charities and volunteering their time. Their behaviors may include regularly donating to causes they care about and volunteering their time and resources to help others.
Growth and learning
Still others prioritize investments in personal and professional development. They focus on acquiring new skills and knowledge to increase their earning potential. They may prioritize education, training, and networking, and their behaviors may include investing in courses, workshops, and conferences and seeking out opportunities for advancement and career growth.
How Financial Values Influence Decisions
Your financial values are a major factor in the choices you make every day. They can shape everything from what you buy to the career you choose.
Budgeting and Spending Habits
Financial values dictate how you spend your money. If security is a high priority, you might put most of your money into savings and insurance. If you value comfort, you might spend more on home decor.
Investment Choices
Are you willing to take on risk for a bigger payout? Your financial values will determine the answer. If you value freedom and the potential for wealth, you might choose riskier investments. If you value stability, you’ll likely prefer low-risk options.
Debt Management
Some people avoid debt at all costs. Others are fine carrying a balance. If you value security, you might prioritize paying off debt as quickly as possible. If you value experiences, you might be comfortable carrying debt to finance travel or entertainment.
Career Path
Your financial values can guide your career choices. Someone who values family might prioritize a job with flexible hours and good benefits, even if it means earning less. Someone who values status might pursue a high-paying, high-pressure career.
How to Identify Your Financial Values
It takes some soul-searching to figure out your financial values. Here are a few ways to get started:
- Self-Reflection: Ask yourself some questions. What is truly important to you? What brings you happiness and a sense of purpose? What are your dreams for the future?
- Prioritization Exercises: Rank your financial goals and values. Which are most important? What are you willing to give up to reach your financial goals?
- Seeking Professional Guidance: A financial advisor can help you define your values and create a financial plan that reflects them. A financial therapist can help you work through any emotional baggage you have related to money.
Once you know your financial values, you can use them to make better decisions about how to earn, save, and spend your money.
Wrapping Up
Understanding your financial values is key to making sound financial decisions and building a healthy relationship with money.
When you align your spending, saving, and investing with what’s truly important to you, you’re more likely to experience financial well-being and overall life satisfaction. Living in accordance with your financial values can reduce financial stress, increase your sense of financial security, and help you make progress toward your long-term goals.