Opinion | Align personal values and financial decisions to live life on your terms

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Are your money values in line with your personal values? Money values are important as financial decisions are based on them. They are driven by one’s experience in managing money and outlook on money. Often, I find that money values are not in line with personal values and this is the cause for being perennially worried about finances. The way people manage money is very different from what they believe in otherwise.

Take the case of A, who is a conservative and spiritual individual and leads a simple life based on Ayurvedic principles. Yet he has invested more than 50% of his portfolio in high-risk alternate investment funds (AIFs) and has the balance in low-yielding traditional investments. Or B, who is a high-flying CEO known for his love for adventure. B only invests once a year during tax planning time and that too only in fixed deposits (FDs). The highest allocation in his portfolio is to a five-year tax-saving FD. It is almost like they are Dr Jekyll and Mr Hyde—different personalities in life versus financial life. A, who believes in a simple and balanced lifestyle, went in for AIFs because of the high promised returns. B, who is otherwise a big risk-taker, did not want to take an iota of risk in his portfolio. Similar is the situation with most women. Women, who are otherwise so clued into everything, are clueless (in most cases) where money management is concerned.

Recently, someone at my fitness class asked me how he could multiply his money quickly. The individual is a fitness freak who guides others on how to build their bodies and trains people for marathons. Obviously, the discipline, patience and hard work he is teaching is not what he is expecting out of his money. It is the same with millennials—living life on the high street but wanting to do meaningful work or wanting to make a difference to the society and environment. Their strong views on life dissipate where money is concerned and they are happy to live on loans.

This divergence of core and financial values seems to be stemming out of a wrong set of beliefs about finances and inherent biases. People seem to be open in all areas of life, other than money. Having good financial values is the start to the path to financial independence as it helps you strategize your finances to your goals. The journey to financial independence starts with figuring out what matters both in life and with finances. You need to think about what you want from your financial life and how this stems from your core values. Is it financial security, financial stability or financial independence? Or is it just to make ends meet? It is only when you think of what matters will you give more time and will be more diligent with your money.

You also need to decipher how you are going to align these values with your financial goals. Everybody wants financial stability, but what are the steps they are taking to get there. The first step is obviously controlling expenses, especially lifestyle expenses, followed by taking life and medical cover and then investing regularly. If family is your most important asset, and you haven’t got adequate life cover, then your actions do not support your values.

For investing in a disciplined manner, one needs to draw up a financial plan. This means, you need to invest as per your financial goals and not randomly. More importantly, your investment behaviour needs to be in line with your values and goals. As with A and B and countless others, investment choice are where investor behaviour diverges the most from core values. Investing in a five-year FD for an education goal 15 years away or having no equity exposure in a portfolio means that you won’t be able to reach your financial goals, which means you may not be able to support your values of giving your child the best education. Irrespective of your values, some thumb rules to go by would be to invest as per time to goal, diversify the portfolio, take some risk in the portfolio and be patient with returns.

Money values impact the way we live and hence having them in line with priorities and financial goals means being able to live life on your terms.

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