Does Your Money Support Your Values?

During my time as an advisor, I have had the pleasure of meeting a lot of people. Some are well into their careers and have been practicing medicine for decades. Others are medical students still deliberating about which specialty to go into and how to rank their match list. Each interaction gave me a glimpse into various financial values, goals, accomplishments and mistakes. Because of this experience, I am frequently asked the question below, so I decided to make it the focus of this column.

“What is the most frequent large financial mistake you see?”

A number of answers came to mind: buying a house you only plan to own for a short period of time, investing a significant portion of your net worth into the stock of just one company, increasing your spending to match your increasing income, buying a house that uses far too much of your monthly budget, spending thousands of dollars on clothing/electronics/expensive toys that were rarely used, etc. As I thought more about this though, what I realized was in almost every conversation where a client was explaining a past financial mistake the regretful choices had a common root cause: they cared too much about what others thought about their financial decisions. I have seen clients get talked into buying a home because they were told “renting is throwing your money away.” I have heard stories from clients about previously investing a huge percentage of their portfolio into one company’s stock because their family/friends/colleagues were doing it and they had the “the fear of missing out.” As income increases, I have watched people continually increase their spending because they think it’s what society expects of them or because they want to impress others.

Let me be very clear. I do not have any problem with clients spending money. Many of you have had a meeting with me at some point in your career where I actively encouraged you to spend a significant amount of money on a house, vacation, experience, etc. Life is not a game focused on building your net worth as high as possible. Unfortunately though, what I see far too often are individuals and families caught in a cycle on excess spending on things they do not truly care about. Your decisions with money prove your values. A lot of people tell me what is important to them, but I ask them to prove it by showing me how they spend their money. If having a huge home and an expensive car is important to them, that is perfectly alright! If traveling 12 weeks out of the year is how they maximize their enjoyment, there is nothing wrong with that! If working part time and sacrificing earning potential enables them to spend the most time with their kids, I think that’s a great decision! The problem arises when someone tells me the most important thing in life is “______” but they are spending money in a way that contradicts their value statement. This problem needs to be addressed and the sooner the better.

What is most important to you? Is your financial strategy supporting that belief? You have to be brutally honest with yourself about what you are spending money on and why. Are you spending almost unconsciously out of habit? Are you spending because it demonstrates to others that you are successful? Are you spending because it is something you truly want?

I think this section can best be summarized by a scene from a sitcom I enjoyed a lot: Scrubs. In season 8 Dr. Kelso encounters JD and Elliot in a coffee shop discussing a big life decision and how much judgment they will receive from others. Dr. Kelso, also doing a bit of his own soul searching as he recently entered retirement, interjects into their conversation and says “Who cares what anybody else thinks. Just look into your heart and do whatever the hell makes you happy.” Obviously we need to make sure we are responsible with our decision making, but if a financial choice you make is ethical, true to your values, and will make you happy, who cares what anybody else thinks.

This article was originally written in March of 2016