Building Your Financial Plan Part 2 – Understanding Your Financial Personality, Values and Goal Setting

This is our second post in the steps to building your comprehensive financial plan. See Part 1 here. Identifying how you feel about money and the role it plays in your life is an important first step to then evaluate what your financial goals are. Emotions and personality type can have a significant effect on your relationship with money and how it works for you. A few common behavioural categories have been identified when it comes to relationships with money and each have inherent pros and cons.Writing down your financial values will determine your motivation for wealth and help you remain focused on short and long term goals. Here are a few of the common values related to money I have read about over the years:


There are many people that prefer to focus on optimizing their happiness today versus later in a future that is so uncertain. Money creates an opportunity to spend on objects and activities that provide gratification now. If this money value system predominates your thinking, you likely have a tough time saving. I certainly had an element of this in my 20’s with large weekend food and bar tabs and numerous weekend getaway trips. From a purely budgeting perspective, these activities and purchases can be viewed as frivolous spending. Yet we all know that life experiences and relationship building with friends, family and loved ones lead to real happiness and improved quality of life.

Peace of Mind/Security

For this type of person, the feeling of financial uncertainty is overwhelming. You may identify with worrying about the future or not having enough during an unexpected life event such as job loss or a death. This type of person will often be a reasonable saver, but will be a more conservative investor that loses out on long term wealth optimization. As long as reasonable savings are achieved, this type of person will often eventually achieve their financial goal and a comfortable average retirement. The main problem is it will likely take longer to get to the financial goal than was needed.

Financial Freedom

This type of person is typically motivated by maximizing their available choices in life. This may be to retire early, focus on other career opportunities, or simply enjoy flexibility in their life. Many will focus on obtaining money from additional means outside of their main career. This may be from starting their own company, second jobs, working long hours or finding ways to have their money work for them via real estate or investments. A high value is placed on getting out of the rat race and not being stuck in the cycle of working hard to live on the weekends.

This individual will run the risk of being too focused on rapid wealth accumulation. This may lead to searching for get rich quick schemes or forgetting to enjoy the small things in life. After achieving financial independence, they may also get stuck in the game of ongoing rapid wealth accumulation beyond what is needed. This may distract from the whole purpose of their financial freedom goal and will keep them firmly in the rat race.

External Score Card/ Respect

I referenced the concept of the external score card term coined by Warren Buffet in an earlier post. Many people feel that demonstrating their external wealth leads to improved self-esteem and gains the respect of others. This value system is understandable since the majority of society does assume success if an individual drives a nice car, wears designer clothes or lives in a mansion.

These individuals will often have a difficult time saving and will need high paying careers to maintain their spending habits. Debt accumulation can often be a major concern with this type of relationship to money. Long term financial happiness is often at risk when job loss or unexpected circumstances arise.

Internal Score Card/ Inner Confidence and Independence

This is similar to the above scenario, except the person derives their self-esteem from feeling financially secure. Typically this individual is not a big spender and continues to live a modest lifestyle even when they can afford to live a more lavish lifestyle. People around them often have no idea the magnitude of their net worth later in life. These individuals are more likely to take savings to an extreme and risk missing genuine life experiences secondary to thrift.

Final Thoughts On Values

You can see why your relationship with money may have advantages and disadvantages in how you approach your financial plan. You may find you have elements of many common value sets, but often one will be dominant. Being cognizant of your core values will allow you to be aware of what may work for or against you in your financial journey. For fun, I looked back at the original financial plan my wife and I wrote when graduating from medical residency. The core values and goals were:

  1. Option to pursue other ventures/medical volunteering while maintaining current lifestyle
  2. Option to rely on only one income to afford maximum flexibility while raising a family
  3. Long Term Financial Freedom/Independence

We were very concerned early on about maintaining our financial choices both in the short term and long term future. We firmly fell into the Financial Freedom subset which fits with where we are today. As an aside, I find I identify more with the YOLO attitude after working in medicine for the last decade. Seeing young patients die of cancer and hearing their regrets certainly makes you think of the value of living each day to the fullest. At the same time, a YOLO perspective conflicts with my core prudent financial value set that has been present for many years. Luckily, I found an unexpected nice feature to achieving our financial independence early. It has allowed me to feel more comfortable spending future earned income on life experiences today that bring guilt-free joy to our family now that our long term financial goal has already been achieved.

Which financial value do you ascribe the most value to? Are you and your spouse different? How do you bridge that gap?  I thought it would be interesting to do an anonymous poll on which relationship with money you most readily identify with, which is linked below.

Financial Goal Setting

As mentioned previously in the About Me section, the only way to achieve a significant event like financial independence is from effective goal setting. You didn’t become a professional overnight and neither will financial independence. The good news is you are likely already a goal-oriented individual given your professional success. The discipline and behaviour is already there and now you just need to re-direct it towards your financial success.

I believe that a good framework for effective goal setting is the SMART system:

 S – specific, significant, stretching

M – measurable, meaningful, motivational

A – agreed upon, attainable, achievable, acceptable, action-oriented

R – realistic, relevant, reasonable, rewarding, results-oriented

T – time-based, time-bound, timely, tangible, trackable

Unfortunately, a financial goal that may take 5 years or longer will be harder to feel measurable, achievable, realistic or timely. The need for short term realistic goal setting bridges the long term goal to make it achievable. Tracking your net worth monthly creates a measuring stick to evaluate your efforts and provide feedback.

Possible short term goals in personal finance may include:

  1. Student debt or credit card repayment
  2. Saving a down payment for a home
  3. Creating an emergency fund
  4. Building up passive income streams from investments
  5. Achieving certain net worth within a set time frame
  6. Improving your savings rate by 10-20%

These examples would then be personalized with the SMART system to make them work for you. Make the goals challenging yet attainable. Once a goal is achieved, it should be celebrated with something that will make the success memorable. Positive feedback loops are powerful and the celebration will make each future goal even more desirable.

The homework now is to actually document some SMART financial goals which should take a few days to complete properly.  The next post on understanding of your current lifestyle expenses and cash flows will help to ensure these goals are realistic and achievable.


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