My wife, Michelle, and I had a great little weekend getaway this past weekend. I can’t tell you how many years it’s been since we took a weekend just for ourselves. Last thing I can think of was seven years ago for Michelle’s 30th birthday.

It came about because my wife planned a weekend for us at The American Club in Kohler, WI as a Christmas gift, which is not something I’d normally do. It was incredible. We ate and drank well, enjoyed the spa and the beautiful grounds and generally had a very relaxing, luxurious time together.

Most importantly, the trip gave us the opportunity to talk about our lives, our past, our future, and generally strengthen our connection (thank you, Mom, for coming from Indianapolis to watch our three kids and dog this weekend).

If you know me, you know that I’m pretty conservative with my spending (some would say “cheap”), which is one reason we don’t travel much. Another reason is I find it hard to be away from my routine for too long. I start to get anxious if I’m not being productive. I even start getting antsy at the end of long holiday weekends. Additionally, it’s not necessarily easy or relaxing to travel with three little kids! So, instead, we do short little weekend getaways as a family a couple times a year. That’s about the extent of our travel until the kids are older.

I grew up quite humbly, I started working almost as soon as I was legally allowed, I paid for most my own college and graduated with student loans, which I paid off early by sacrificing lifestyle and being disciplined at a young age.

Because of that history and because of our oldest daughter’s special needs, which have created a fairly significant time and financial burden on the family over the years, along with the potential volatility of my income, I tend to be conservative with spending.

However, it’s nice to be in a position to enjoy nice things/trips occasionally and not worry about the cost or feel guilty about it, which got me thinking about the purpose of money and the various reasons its important to different families.

You probably remember Maslow’s Hierarchy of Needs, which most of us learn in basic psychology class (illustrated below).

In short, Maslow’s model illustrates the idea that we first need to satisfy basic needs essential for survival (food, shelter, security, etc…) before we can pursue higher order needs (status and reaching full potential).

The same concept applies for the concept of money. There are certain items we need money for in order to survive but beyond that money has a different purpose for different families.

It’s important for every client of mine to understand the purpose for money in their lives…to understand why money is important to them, and what it’s for. It helps us make better, long-term financial decisions.

I’ve heard some families formalizing this in a Statement of Financial Purpose where a family discusses and physically writes a short statement about the purpose of money in their lives to act as a guiding principle in their decision-making. Love this.

I do this with clients in my own way. For example, the first thing I do when a new client hires me is build their Financial Plan, which, by definition, defines their financial goals (essentially their financial purpose quantified) with quantifiable specificity. Then we build out a roadmap to most efficiently and effectively achieve those goals while minimizing risks and threats. After all, how can we map out a route if we don’t know where we are going?!

So, although, we don’t have a separate, formal Statement of Financial Purpose document per se, financial goals are explicitly listed and quantified.

Some broad, generalized examples of why money is important to different families:

  • provide adequate resources so we can do things we enjoy and freedom from having to do anything we don’t enjoy
  • provide freedom to our children (Warren Buffett approach -> provide enough to kids so they can do anything but not so much that they can do nothing).
  • maintain adequate resources to travel (or, more specifically for some -> to travel luxuriously)
  • ensure my spouse will not have to work if I were to predecease her/him
  • fund charitable goals into perpetuity
  • create a lasting family legacy
  • collect fine art, antique cars, etc…
  • have a family vacation home

Ideally, we get more specific than what’s listed above for planning. For example, travel “luxuriously” means something very different for a family with a $100 million net worth than it does for a family with a $1,000,000 net worth.

The Financial Purpose is a guiding principle to help keep us focused on what we have deemed to be important for our family. It helps keep us focused when we could get distracted by other “shiny objects” that come along and it may prevent us from “gambling” with our nest egg.

Referring back to the hierarchy of needs, my job is to help clients become financially bulletproof. Once we’ve done that, we start to focus on “higher-order” goals that are within reason given their unique circumstances. In fact, within the financial projections we have financial goals categorized into Needs, Wants and Wishes.

It’s important to be honest with ourselves on why money is important and it’s purpose in our lives. It doesn’t have to be some world-changing idealistic goal. It certainly can be for some people, but it does need to honestly capture what is important to us. Once we’ve identified that purpose we can begin building a plan for achieving, or maintaining, it.

We must also remember that no “route” that arises from financial planning is set in stone. We set our destination, and we know our starting point, but things will always arise that require adjustments in order to stay on target. That’s the importance of proactive planning.

So, sit down with your spouse, open a bottle of wine or pour of cup of coffee and talk about these questions (courtesy of Behavior Gap):

  • Why is money important to us?
  • Why am I working so hard? For what purpose?
  • How would I describe a life well-lived?

Once you’ve answered those questions honestly, craft a short statement on your Financial Purpose and use that as a guiding principle for major financial decisions -> Does this decision align with my purpose? Will this decision advance progress towards my most important goals or will this decision inhibit my progress? Are my actions aligned with my purpose?

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