They say that there are two types of people out there: the savers and the spenders. You have to be one or the other. I think that just like everything else in life, there are some shades of gray to this definition.
How you save AND how you spend are both determined by your financial values. At different stages in your life your financial priorities may change but your values will be a pretty consistent thing. For example, if you value family, you’re probably going to build a life around being able to communicate and visit with them. Maybe you live near your parents or you establish a Sunday night dinner routine, a la the Sopranos. Those practices show you value your family.
The same idea applies to your finances. You may not be a clear cut saver or spender but your financial values will color your money habits. If you can recognize your financial values you’ll understand your spending habits better and be able to change any bad habits you may have developed.
I’ll use myself as an example. I value financial security above everything else related to money. I grew up in a single income household with four people and money was always pretty tight. I graduated college with $25,302 in debt and jumped around part time work for years. It made things very uncertain and created a lot of stress for me. I constantly felt stressed about my debt, guilty about any extraneous spending and worried about finding full time employment.
I had no financial stability. My core value wasn’t being met. It made everything else in my life harder as a result. So in September of 2014 I snapped out of my funk and got serious about paying off my debt. I knew that carrying the debt was the biggest culprit in my financial insecurity. I knew that debt would follow me forever if I let it and it would limit my future life options.
I dedicated myself to paying it off (I had around $17,000 left to go) and I accomplished my goal in June of 2015. Let me tell you, it felt great to make that last payment! The entire process was transforming but more than that, it increased my happiness every day. Each time I made a debt payment I knew I was increasing my financial security. As my debt got smaller I became more stable. That made me happy and less stressed.
So for me, recognizing my financial value of being financially secure helped motivate me to start my debt payment process. It kept me motivated throughout the ensuing months. That one value alone helped remind me to save instead of spend when I came into some extra birthday cash and it helped me look for ways to downsize my lifestyle and throw as much cash towards my debt as possible.
Recognizing your financial values can help you do the same. Whether or not you have debt to pay off, knowing what it is you value deep inside will help you mange your money. Let’s go back to the family example- if you value family and know you want to have kids of your own some day, it can make saving for a house easier. You’ll be feeding into that value with every dollar you sock away. You’ll be gifting your future self something that truly matters to you.
Of course I have other financial values than just stability. I also value traveling, so I’ve opened a saving account specifically to save money for travelling. I know I value financial independence and I keep a healthy emergency account at the ready, so that I don’t need to ask for money or incur debt in case disaster strikes. That financial independence value has also encouraged me to DIY more things and learn more skills. I’ve learned how to sew and change my own oil this past year. These skills save me money because I don’t have to pay someone to keep my car running or fix a dress of mine, and they comfort me because I know I’m more capable of taking care of myself with these skills than I was without them.
What are some of your financial values?