The start of a new year is a great time to begin focusing on your personal finances. Throughout 2020 FloatMe will be releasing several mini-series of articles around personal finance.
In this article we will be focused on the impact personal values have on personal finances and how they can influence your financial decisions. You will also understand how your values can help you set financial goals which are achievable and satisfying.
"Float Finance" is a series of accessible articles, tools, and resources designed to empower early career employees and students to navigate their financial journey.
So, what are values and how do they influence your decisions?
Generally, values are the people, things, places, and ideas which are important to a person and which guide how they make decisions. These values influence how you prioritize your time, energy, and your money.
A great way to understand them is to take a moment and ask yourself “What contributes to how your values are formed?” That is a little vague and might be hard to answer. Instead, step back and think about “What people, things, places, and ideas matter most to me.” They might include your family, faith, your school, certain friends, culture, something about your job, and many others!
Once you have a few of these, ask yourself “Why?” The answers to that question are your values. Some examples include creativity and self-expression, your independence, a desire for social status, or being healthy.
Values in action
Imagine a young couple, Sarah and John, which just received their tax return but are having trouble deciding how to use it. Sarah paid her own way through college by working 25 hours a week while going to school full time; she still has some student loans and her father is struggling to make ends meet. Sarah would like to give her father most of the tax refund to use as a security deposit to move into a new apartment and use the rest to pay down her student loan debt.
John’s parents helped him with college expenses; he graduated with few loans and already paid them in full. He would like to put most of their tax refund into savings accounts he and Sarah have set up to buy a house. He’d like to use the rest to take a vacation with his parents- he wants to spend quality time together as a family.
Based on this information, Sarah probably values financial independence (paying down debt), looking after family, and showing gratitude. John’s values may include quality time with family, social status (being a homeowner), and having new experiences.
The key takeaway
Sometimes your values may conflict with others’ values. That’s ok— that may mean making compromises. Understanding your core values can help you set realistic goals. That’s because you are more likely to keep working towards a goal which brings you closer to the life you want to live or to goals you have set for yourself. Ultimately, understanding your values can help you make better spending decisions which will help you meet your goals and achieve financial success.