While personal finance primarily deals with money management, the most important aspect of personal finance has nothing to do with money. I am talking about your values, your perceptions of what is most important in your life. Your values are the yardstick by which you measure to what extent you are succeeding or failing at life. Values determine your priorities. Priorities drive the decision-making process. Decisions regarding spending and investing are at the core of personal finance. If you find you are having trouble getting your finances under control, your values may be the root of your problem.
Where do values come from?
You derive your values from your parents, religious background, ethnic culture, society, mentors, and experience. For example, if your religious upbringing emphasized giving, you may value donating your time and money to charitable enterprises. When you cannot give as you think you should, you feel guilty. While we know where values come from, it is not always obvious how you came to have a certain value. For instance, if your parents were frugal, you may value saving as an adult, but not necessarily. You may resent your parents for not spending more than they did when you were a child, and as a result, you value consumption instead of saving. Your experience with frugality was negative so you adopted the opposite value.
While we know where values come from, it is not always obvious how you came to have a certain value. For instance, if your parents were frugal, you may value saving as an adult, but not necessarily. You may resent your parents for not spending more than they did when you were a child, and as a result, you value consumption instead of saving. Your experience with frugality was negative so you adopted the opposite value.
Values can change.
No matter what your upbringing or background, your values can change. Those things that influenced your values during your youth continue to influence your values throughout your life. Say you value consumption, but over time, consumption leads to financial hardships, and this causes you to value frugality later in your life. People often value money over time early in life as they perceive they have less of the former and an abundance of the latter. As they age, they may come to value time over money.
What values are compatible with successful money management?
Here is a partial list of personal values that are compatible with successful money management: abundance, balance, confidence, control, discipline, economy, financial independence, flexibility, freedom, frugality, individuality, industry, investing, optimism, order, organization, patience, prosperity, prudence, self-control, self-reliance, and thrift. If you possess many of these values, you have what it takes to be successful in personal finance. You may only need some guidance or tools to gain control over your money. If you possess values that are incompatible with successful personal money management such as expedience, status, and/or conformity, you will probably find it difficult to be successful at personal finance until your values change.
What are your values?
The important thing is to examine your values. Some may be obvious to you, others may require some digging. Honest answers to the following questions can help you begin to identify some of your values.
- How do you spend your time?
- How do you spend your money?
- Who are your friends and what do they value?
- What do you do for a living and how do you feel about it?
- What motivated you to purchase the particular make and model of the vehicle you own?
- What motivated you to purchase the particular house you own?
- How do you feel when a close friend receives a financial windfall?
- How do you feel when your neighbor purchases a new car?
- How do you finance large purchases?
You can change your values
If you find that some of your values are incompatible with successful money management and this is hampering your ability to gain control over your finances, there is hope. You can change your values. You do it by substituting a value that is compatible with successful money management for one that is not. For example, substitute discipline for expediency or thrift for consumption. Now make that new value a part of you by taking action that reflects the new value. For example, act on the value of discipline by saving a portion of each paycheck. Repeated action that reflects the new value is the key to successfully changing your values. Compatible values form the foundation for successful money management.
K. C. Knouse is the author of True Prosperity: Your Guide to a Cash-Based Lifestyle, Double-Dome Publications, 224 pages