Step Four – Goals vs Values
Goals and values are different and can conflict – I see this often when meeting with new clients.
Values are your fundamental beliefs, how you want to live life and why. These values are guiding principles that dictate behaviour and action. A goal is a measurable target or something you would like to achieve with a specific timeframe.
A trip to Italy costing $12,000, in two years’ time, is a goal. Specific and measurable. Whereas, experiences and flexibility are core values. Saving for a home deposit is a goal. Comfort and security are core values.
The reason it is important to define your core values is to make sure that your goals are aligned with your values, otherwise, you may be no happier or satisfied in life by achieving some of your goals. For example, if you value freedom and new experiences, taking on a large mortgage that leaves you with minimal disposable income may impact your life satisfaction because your ability to fulfil a core value would be reduced.
Establishing value-centered goals can give us a greater purpose in life, separate the important from unimportant, drive us in a positive direction and often as goals change, values are consistent.
Step Five – Aligning your budget with your goals and values
Aligning your budget with your goals and values dramatically increases the likelihood of achieving future goals. An important part of this process is identifying whether current spending habits are stopping you from getting where you want to be.
In my role as an adviser, I never tell clients where to cut down their spending. Instead we talk about “value”. You need to identify what brings you value. What in your life (represented by items in your spend budget) is bringing you joy and what isn’t. It’s a valuable exercise that can help keep you stay accountable, reclaim more time, consume less and living a more intentional life.
Step Six – Get a better system…
Forget fancy products or the worlds best investments. Sound money management and positive financial habits and behaviours drive MOST of your financial independence.
A better banking and cash flow allocation structure will support good savings and spending habits and make it easier for you to achieve your saving targets. Using a single bank account is not an effective way to save.
We advocate separating your accounts into different purposes – guilt free spending, fixed expenses, future fund, lifestyle fund – there are many variations of this – but the key is having an easy to understand system otherwise you are second guessing what you can and can’t spend and it becomes over-complex and ineffective.
Step Seven – Automation
There are industries devoted to making us spend money on things we don’t need. Not to mention an overload of information available to us on social media. We suggest automation of cash flow into your “buckets” to save time and reduce temptation, poor money choices and today’s ever-increasing decision fatigue.
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