Values based financial planning is about pursuing financial goals based on your values. Unfortunately, way too many people just do not take the time to sort out what matters to them!

Believe it or not, what most people get when it comes to creating the traditional financial plan is someone else’s idea of what your values should be!

Unfortunately, financial planning has been way out of reach for many Americans. This has been due to financial planning’s focus on investable assets and the lack of those assets in many American households. That said, there are also many Americans who’ve also gone to college and find themselves with higher-income careers.  But with proper financial planning in place, people can actually change the course of their lives, as well as their family’s lives.

However, this particular group’s long-term comprehensive financial planning is not as tight as it should be when it comes to their investable assets!

It’s easy to focus on alleviating the pain of not having income or not enough wealth. Especially at the expense of an American’s cultural or personal values. Many advisors tend to focus on the value of “having more dollars,” which may not bear well with some cultural groups—especially for those who’ve been marginalized.

But is this the right approach?

Shouldn’t the pursuit of one’s financial success goals be based on one’s values (aka “values based” financial planning)? Well, unfortunately, most people do not take the time to sort out what matters to them most! Again, what so many people get when it comes to creating a financial plan is someone else’s idea of what our values should be!

For example, do you want your investments in mutual funds and exchange-traded funds to include private prisons or green energy?

Here are the two dimensions of values-based financial planning:

  1. Goals/dreams and building/implementing.
  2. Values-based (values first) financial planning goals

What do you think about when you hear financial planning connected with values? 

More often than not, conversations regarding finance do not include personal or even cultural values. We often hear the “pursuit of happiness involves the pursuit of money for money’s sake.” I was once told that I should not be concerned with anything other than making money today. Once I had money, I could then decide to be charitable!

As a Certified Financial Planner™ (CFP®) professional, I believe the first step starts with articulating your values around financial success. A few examples include:

  • Family
  • Faith
  • Career
  • Sustainability
  • Sports

Your thoughts around family may include your children’s or grandchildren’s education. That may be a private school based on your religion, and/or paying for a four-year college education. It may be a stand against abortion or supporting foster parenting. Your concern over climate change may be promoting recycling and other sustainability measures.

I have found that many of our long-range goals come into sharper focus as we get closer to the time frame we want them to be realized. However, without an intended destination, we won’t know what we need for the trip. Often, there are many competing objectives.

We must make value judgments as to which objectives can be fully achieved, or find a way to satisfy each objective in a way with which we are comfortable. Often this process of prioritization helps you better determine what matters most!

The Design

Let’s say you want to build a house. You may be so excited about having a house built that you may not think to express your desire for building it in an eco-friendly way. Furthermore, not being an expert in the field, you may not know the extent of your options, such as ways to keep the construction green or ways to ensure that the completed house functions in a green manner.

Hopefully, your architect would ask about using or not using green materials. Some materials may increase the cost of construction. Some materials may have a payoff in the short run in terms of lower operating costs.

If you’re like my sister-in-law, you’d be willing to absorb these costs even if there isn’t a short-term pay-off because of your strong desire to combat climate change.

You may decide that some are worth the investment and others are not. That’s why it is your values based financial plan, not someone else’s. However, if the question of green building materials had never been brought up, you might not have any input about whether this desire for green building would be incorporated into your house!

You may also choose to focus your charitable planning on organizations that promote your values around sustainability and climate change. You may do this with ongoing charitable contributions during your life and charitable planning at your death.

I believe everyone should have an estate plan that reflects one’s current values. While most of us assume we have more tomorrows to get things done, none of us are promised the next minute!

Building on values based financial planning

For some, values based financial planning may mean socially responsible investing (environmental social and governance or ESG investing). You can ask an investment advisor representative to seek investments in companies that are either primarily green or those that make significant investments in green operations, or even those that engage in social outreach. You might also seek out green investment funds. There are plenty of investment strategies that can be pursued to support your deepest values!

Discuss your values with your tax advisor and estate planning/wealth planning attorney, and that they can further refine your plan in their specific areas of expertise. Having a coordinating wealth advisor is important to ensure that the professionals are working together to maximize your goal achievement.

Ready for a financial plan checkup?

Have you actually written down your values? Have you discussed your values with your financial team, tax advisor, estate planning attorney, Certified Financial Planner™, etc.? Remember, a Certified Financial Planner™ who embraces values based financial planning, like me, can help you pursue your values rather than someone else’s! If you’re ready to get started, you can call me at (312) 448-1010 or complete my questionnaire form here.

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