Everyone wants to reach a level of financial success that allows them to flourish, now and in the future. And I’d argue that’s points to a great starting point if you want to define what wealth actually is:
Wealth is having the resources you need to experience want at every stage of your life.
Most people focus on the question of how do you enjoy that kind of financial success for yourself. A lot of financial advice, in turn, focuses on the mechanics of building wealth.
That’s important—but it’s not the whole story.
Yes, you have to know how to earn, save, and invest money if you want to increase your net worth. That’s the “how” and there’s no shortage of content online that will try to teach you that.
What most of this how-to advice misses, however, is what and why.
If wealth is, as Morgan Housel puts it in the Psychology of Money, being able to do what you want when you want it for as long as you want, then we have to know what we want in the first place.
That brings us to an overlooked but critical part of financial planning to grow wealth: knowing not just your goals, but how you shoud prioritize those in the context of your money and your priorities.
What Most People Miss When Making A Financial Plan
You have to know your goals. What are you trying to achieve?
We encourage clients to make SMART goals. A goal is “smart” if it’s Specific, Measurable, Actionable, Realistic, and Time-Bound.
You have a better shot at achieving goals that meet this criteria.
Using this structure means you understand what you’re working toward. That, in turn, lets you reverse engineer a strategy to get there.
The SMART goal framework is nothing new, but we still encourage it as part of the finanical planning process because it works. (There’s a reason you’ve heard it a million times before!)
However, SMART goals alone are not enough. You have to put those goals into the context of your financial reality.
This is where most people start to struggle, because they might know the numbers on their balance sheet.
But they don’t fully understand their own values and priorities, especially when goals start to compete against each other for scarce resources.
You Can Afford What You Want — But Not Everything, All The Time
When we’re talking about priorities, we’re essentially asking questions like:
- How does Goal 1 impact Goals 2, 3, and 4?
- How do these goals look arrayed on a timeline of when you think you can or when you want to accomplish them?
- How do you manage competing priorities, especially if your most important goal is 30 years away (i.e., retirement or financial freedom) but all your other goals are more pressing and immediate from a time perspective (happening in the next 1 to 5 years)?
One of the ways that we help our financial planning clients understand the conversation around goals, priorities, and tradeoffs is by modeling out probable future outcomes of their current decisions.
We run projections using variables including stated goals, expected timelines, and assumed costs. We plug our assumptions into the system and, at first, only look at what happens if things remain status quo.
In this first trial run, we usually see that clients (even those making $500,000 or more a year), cannot afford all their goals on their preferred timelines based on current income figures and savings and investment rates.
The first lever to pull to change those projections is saving more. There are other levers, too, including earning more, spending less, or reducing expectations around specific goals (or removing a goal from the plan entirely to free up money for other wants and needs).
But before we start recommending changes to behaviors or actions, we also look at the impact of the stated goals on each other.
We can show the impact of one goal on another — say, paying for a top-tier private college versus retiring at 55. Both these desires demand huge cash outlays and may compete with one another.
This is where we begin to consider tradeoffs.
Perhaps the retirement age needs to be 60. Maybe you commit to reducing some spending so you can increase contributions to investments. Maybe you agree to fund 60% of a college education, not 100%.
There are countless levers to pull. Deciding exactly which one depends on knowing what you value most.
How To Sort Through Competing Priorities
Your values serve as a bit of a compass that can help orient you around your goals. This is especially helpful if you dont’t have a lot of clarity on exactly what you want to do with your money.
This is a common scenario to find yourself in once you start making a high income and have checked off many items on the financial order of operations.
Once you have an emergency fund, max out your 401(k), contribute to something like an HSA or a Roth IRA, can save for short-term spending goals (like an international trip or a home down payment)…
You may find yourself feeling like, “what’s next?”
You took care of the obvious financial chores and duties. So how do you direct your money now that you’re making enough of it that you have plenty available to go toward other goals, needs, or desires?
Running Your Goals Through The Framework Of Your Values
Again, this is where looking to your values can be helpful and informative. “Values” refers to core values.
Core values are beliefs or ideals that guide your behaviors and set your standards. They represent elements that you consider aspects of a life well lived.
When you live in alignment with your values, you feel happier and fulfilled. You might experience a sense of groundedness or purpose.
When you act in a way that goes against your values, you feel out of integrity with yourself. You feel adrift, stressed, and disconnected from yourself. You may feel disconnected from others, too.
Money alone truly cannot buy happiness. Just having more money won’t solve your problems (or bring peace and satisfaction) if you are using your financial resources in a way that is out of sync with your values.
That’s why you can see people who are, by any objective measure, very financially successful – and yet they are unhappy and unfulfilled.
This is also why knowing what you value is a critical step to real financial success. You have to look at your financial goals and objectives through the lens of your values.
If what you’re striving for in your life actually goes against your values, it won’t matter how many goals you achieve or how much wealth you build. You’ll feel incomplete and unsettled.
However, if you know your values, then you can:
- Align your use of your money with what’s most important to you
- Feel confident that the goals you set will actually provide satisfaction and happiness when you achieve them
- Make complex financial decisions a little easier, because you can reference your values when making them — if a choice you consider doesn’t align with your values, you know you may need to look at alternative options
Take the time to think about what your core values are. Then, check them against your list of goals.
Are there any glaring discrepancies? Are there things that you’re pursuing in an effort to find happiness that actually don’t line up with what you feel are the core values in your life?
This is a good opportunity to revise your goals if needed before you really dig into the strategies that will drive your financial plan (or not!).
You could find validation that your values and your goals sync very nicely. You might also realize you don’t need to change your goals, but maybe the priority order needs to shift.
Either way, it’s an informative — and transformational — process. It’s also a missing piece to mainstream financial planning.
If you want to build a financial plan that supports your efforts to build wealth and leave you feeling fulfilled and content once you actually meet your net worth goals, then you have to understand what is most important to you.
Get to know your core values. From there, you’ll be able to map out financial strategies to grow assets in a way that actually makes you happy along the way.
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