A 4-Step Process to Integrating Money and Life

Once you’ve abandoned the pursuit of balancing money and life in favor of integrating the two, the question still remains: Now what? How the heck do I better integrate money and life? Like most personal finance dilemmas, the answer is simple, but not easy.

It’s simple because it doesn’t require many steps. What’s more, it’s advice you’ve likely heard before, perhaps multiple times. But it’s challenging because you have to do some work—interior work. And then you have to make some difficult decisions.

Before I share the process, it’s imperative that we recognize a fundamental financial truth, often shrouded in a sea of marketing, misinformation and self-help rubbish that’s more sales than psychology.

RULE: Money is a means, not an end. Money is a tool—a neutral tool that is neither good nor evil. It may, however, be used in pursuit of either good or evil, and everything in between. Money can be well-utilized in the pursuit of goals, but it makes a very poor, lonely goal in and of itself.

Understanding—and believing and applying—this rule is the aim of the following systematic four-step approach to better integrating life and money:

Step #1: Start with why—by acknowledging and articulating your personal values.

Have you seen Simon Sinek’s now classic TED talk? With more than 19 million views, I think he’s struck a chord. Sinek implores us to ensure that what we do and how we do it is rooted in why we’re doing it in the first place. The what and the how tend to flow naturally when we know the why.

Our values are driven by our why. Values are the things in life that we want to define us, the ways in which we’d like to be remembered. They are our core motivators.

There are many ways to explore this inner territory, but all of them require some space for solitude and reflection. If I just say, “Tell me what your values are,” your answers are likely to be superficial. Author Stephen Covey recommends going back into history for an exercise reviewing the most famous set of personal values (he actually called them “virtues”) ever penned, those of Ben Franklin.

The idea isn’t to copy old Ben’s list. But you could do worse than replicating his method, writing a word filled with personal meaning, followed by a sentence or two of explanation. I try to revisit my personal list annually; it’s interesting to see how it evolves.

Step #2: Establish specific, measurable, attainable and meaningful goals, in alignment with your values.

Sorry, I know you’ve heard this before. You know that it’s important to have goals, to write them down, and to ensure they meet certain criteria that give them some heft. But if you’re anything like me, you need to be reminded regularly to think and plan this way. Especially with the advent of the email inbox, it’s all too easy to allow someone else’s goals to trump our own.

When talking specifically about financial objectives, it’s vital that your goals are genuinely your own—not those of some financial guru or your advisor. But this doesn’t mean your advisor can’t help. The advisor’s advisor, Michael Kitces, in his most recent blog post encourages financial planners to aid clients in determining what goals are actually possible. Examining the possibilities before actually setting the goal helps ensure that your goals are attainable, and this doesn’t just apply to lowering your expectations. As Kitces writes, “the problem with goals(-based planning) [is] not knowing how big to dream.”

But most importantly, ensure that your goals are meaningful—that they are in alignment with your values. If they aren’t, you’re likely to suffer one of two possible fates: you’ll either fall short on your goals because of a lack of motivation or you’ll compromise your values.

Step #3: Boldly prioritize, applying the funds at your disposal to the most important goals.

While the Fed might have broad powers to create money out of thin air, you and I don’t. This requires that we make difficult decisions—often—about how to best employ our limited means.

An aging widower wants to both buy a new car and give gifts to his adult children in a year that he incurred significant health-care costs.

A recent divorcee in her late 50s, excited to paint a masterpiece on her newly blank canvas, wants to buy a new home near her grandkids, invest in a second home at her favorite vacation spot and retire early.

A couple with young children wants to max-out their 401(k)s, go to Disney World, finally get those wills drawn up, upgrade their life insurance and save $350 per month in their children’s 529 plans—all in the same year.

As you may have guessed, what each of these real-life scenarios has in common is that they contain more goals than there are dollars. So, after discussing why they wanted what they wanted, we practiced the low-tech exercise of writing down each of their goals on paper, and then putting them in order of priority. Simple, but not easy.

It is at this point we are again tempted to imagine that having more money would eliminate all conflicts. But I assure you that with more money simply come more possibilities, more competing goals and more decisions.

Step #4: Rinse, repeat.

This exercise is not a one-and-done suggestion—it’s a process to be regularly repeated as your values morph and your goals are met or relinquished. Consider making it an annual occurrence, and revisit it after major life events.

This commentary originally appeared November 12 on Forbes.com. I’m a speakerauthor and director of personal finance for the BAM Alliance.

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