Tuesday, August 26, 2008

Your values and your money

Warning: This post gets a bit philosophical.  My next few posts will get back to the nuts and bolts of how to manage your money and prepare for the future.

In order to determine how to manage your money, you need to think about much more than just your money.  You need to think about what you want your life to be like.

Yesterday I told you that I was happy with where my money goes and how I spend my money.  The reason that I am happy about it is that the decisions that we make about spending our money help us to live the life that we want to live.

It is very easy to become seduced by advertising and consumerism and spend money without regard for whether or not it is in your best interest.  If you do not consciously make decisions about how much of your money to spend and how much to save you will almost certainly make poor decisions about your money.  Furthermore, if the decisions that you make about your money are not rooted in your values, you will find that your plan is difficult to stick to and your goals will be difficult to achieve.

Establishing your goals is a matter of setting priorities.  How do you best use a limited resource to meet unlimited wants and needs?

Our list of goals includes making sure that we have financial reserves to ride out a financial emergency, saving for our children's educational expenses, taking regular vacations, supporting charities, and achieving financial independence at a relatively early age.

The reason that we make sure that we are financially able to cover emergencies is because I want my family to be well provided for regardless of our short term circumstances.

The reason that we invest in a 529 plan for my daughter is because we value her future success and want to give her every opportunity to succeed that we can.

The reason that we save for vacations is because we value time with our family and seeing new parts of the globe.

The reason that we support several charities because we believe that it is important to make the world a better place and because we believe that this is what God wants us to do.

And the reason that we are planning to be become financially independent relatively early is because we value our time together and we value the freedom to decide how to spend our time.

We also spend time and money to enjoy our lives right now.  But we make sure that what we spend to enjoy ourselves today does not prevent us from meeting our goals for the future.  Because these goals are linked to our values, when we consider how additional expenses would hamper our efforts to achieve our goals, it becomes much easier to stay on track. 

Does this work for everyone?  I don't know, but it's a big help for us.

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