What’s important to you about money? This can be an uncomfortable question because we are not used to really thinking about money often.
The purpose of this question isn’t to think about goals. It’s to go deeper, to get at the reason for why you have certain goals.
Roy Disney, Walt Disney’s brother, and the former Disney chief executive, once said: “When your values are clear, your decisions are easy.”
Knowing what drives your financial decisions can help you reach smarter financial goals, live healthier and improve well-being, experts say.
“We all have these beliefs clunking around in our heads and for many of us, they’ve been passed down from our parents,” says Dr Brad Klontz, a financial psychologist at Creighton University, in the US.
These internal beliefs are formed by your childhood experiences, the community you grew up in and the habits of those around you.
Mr Klontz identified four common attitudes towards money: money worship, money avoidance, money vigilance and money status.
Do you worry about money despite having a steady income and a healthy retirement fund? You may be “money vigilant”. Do you believe money can solve all your problems? You could be a “money worshipper”.
Recognising your own money personality is the first step towards improving your financial health.
Money worshippers believe more money will solve their problems and you can never have enough of it. You are more likely to overspend and carry debt. Money worship is the most common personality.
Takeaway: If you’re a money worshipper, you can control your spending by creating a budget, a financial plan and learning about the different ways to pay off debt.
Avoiders believe money is bad and they do not deserve it. They may ignore their finances and avoid thinking about them. They may also give away money to others so they don’t have it.
Takeaway: One option if you’re an avoider is to automate your finances – sending money to a separate savings or investment account, for example. Loved ones can help hold you accountable to those tasks.
Those who are vigilant believe being frugal and saving are important. They may be secretive about their finances, highly defensive of their beliefs and uncomfortable discussing their money feelings and experiences with others.
Takeaway: Talk to as many people as you can. If you’re uncomfortable talking to family or friends but have money questions, join an online community to learn from others. Realise that people who make different financial decisions to you are not always crazy. Decrease your judgement and increase your awareness.
People who hold this belief see money as a means to achieving a higher status. They believe self-worth is equal to net worth and may be driven to earn more money than their peers. They may also take risks to make money quickly and buy expensive things.
Takeaway: If you hold this belief, give yourself a cooling-off period before making a purchase. You can also make a budget – and stick to it – to avoid overspending. Make the most of your cash. Track all your spending to understand your trends and spot opportunities to save money.
So, what’s important to you about money?
The first answer many people come up with are usually around security and freedom. But once we pause and think, we can move deeper into the “why” of money. This question faces some inconsistencies in our lives. Let me give you an example.
My friend, who we’ll call Adam, was a top professional whose career required him to be super competitive. He was “type A” to the hilt and worked long hours.
So when I talked to Adam and his wife and asked him this question, I was curious about his response. “Freedom,” Adam said, almost instantly. When I asked what freedom meant, he replied: “More time.”
I said: “Okay, let’s pretend you’re there. Let’s say you have more time. What’s so important about being at that spot?” With some emotion, he said: “I want the time to be with family.”
Bingo. Adam shared he is actually a “vigilant family steward” not a “hard-nosed” lawyer.
Now, don’t get caught up on Adam’s specific answer. His values are his own, yours may be completely different. But keep in mind that once you identify how you think and what’s most important to you, things get clearer.
Being able to answer this question gives you a lens through which to view your financial decisions.
The ultimate value of education is about learning to make better decisions. And after you’ve identified what’s most important, you’ll have incredibly useful information to help you make the best decisions to match your values.
In fact, it can even make it easy to say no to things that distract you from what’s important.
After all, personal finance is more personal than it is finance.
Sam Instone is co-chief executive of wealth management company AES