Would you rather have $1,000,000 or spend $1,000,000?

Money, for the sake of itself, pales in comparison to what it can do for us and how it makes us feel. Maybe it’s not money we’re seeking after all. Maybe it’s safety, security, and peace of mind. To truly understand how to build your financial goals, you need to understand what it is you seek. Most financial plans focus on the money, the savings rate, the investment return, and the bottom line. But few people want the money. They want what it can do for them. So why do we spend so much time on the money? Shouldn’t we be focusing on what it does for us? Isn’t that the goal?

Once you determine your values, you can create goals based on them. Once you’ve established your goals, you can finally start to explore how the money can work for you. This is very different from what most financial advisers are doing. Most financial advisers start with the money. This is why if you google “values-based investing,” the results will be ESG portfolio management. The ESG (environmental, social, governance) portfolio philosophy screens all funds and investments in a portfolio against certain standards. These standards may include vetting a company for the portfolio based on their efforts to reduce carbon emissions or if they have fair and equitable hiring practices in place. This movement is designed to help create a way for investors to align their values with the companies in their portfolio of investments – which can be a great way to layer personal values into the money part of the planning. Incorporating personal values as a foundation of a financial plan requires deeper exploration.

One thing I learned very early in my career as a financial advisor is that I don’t work with money. I work with people. A financial plan that starts with what matters to the person first, then develops goals, and then gets to the money is a financial plan a client can be engaged with. This can get a client to be truly disciplined in the strategy and sacrifice needed to meet financial goals. Meeting financial goals is hard. Making decisions is hard. Having a deeper understanding of the ‘why’ can make it easier.

The values are your anchor. The path of life changes with each phase. As you move from accumulating assets to transitioning to retirement and spending those assets, decades will pass. You and your life will change. You may develop a solid financial plan built on today’s assumptions, but the unexpected happens and throws you off the path. How do you get back on track? Few things are black and white, and many financial decisions do not have as obvious of an answer as we may think a spreadsheet analysis can yield. Rather, we are left to evaluate trade-offs and risk and reward probabilities. And we have to refer back to what matters most to be able to navigate these gray areas.

How do values drive the development of a retirement plan? It is important to prioritize what you value most. Is it your time? Is it the ability to improve your lifestyle? Is it the ability to never worry about market fluctuation? Understand what is most important to you before you get into the math.

Retirement projection inputs include the age you want to retire, how much time you have, how much you want to spend, and how your assets are invested. You may have the goal to retire at age 57 and want to live on $7,000 each month. But when we crunch the numbers, if you retire at 57, you will only be able to spend $5,000 each month. But, if you work until age 62, your budget could be $8,000. You must ask yourself if your time is more important or if the larger budget means more to you.

Or perhaps you have set a goal that you want to have $1,000,000 saved in the next 10 years with little volatility. To do so, you calculate your savings rate and the average return on your investment. The results indicate you need to earn an 8% average return. The investment with an 8% average return is much more volatile than the investment with a 4% average return. But if you stay with the 4% average return, you will only end up with $750,000 in ten years. So, what is more important to you?

Often, when a question is asked, we need to dig deeper to understand the meaning of the real concern. “Why have my small cap international equities gone down in value?” is rarely a concern for the well-being of that asset class. Rather, “What now?” and “Will I be OK?” are the real questions.

Having a goal to retire early may be because one of your most important values is independence. If you drill down into what it feels like to be independent, maybe it isn’t so much that you want to be free from all work, but just from your current employer. What if working for yourself gives you the complete satisfaction of being independent, but you don’t feel pressured to sacrifice for an early retirement? Identifying the underlying value that supports the goal could refocus the goal entirely, thus redirecting the financial plan.

A life well lived is not quantified by the balance of an investment account. We know what matters that cannot be easily measured, and wealth goes beyond asset accumulation. The human experience, no matter how different we are from one another, has common threads for all of us. To thrive, we need a sense of safety and a sense of belonging. We strive to find a purpose, something we are a part of that is bigger than just ourselves. And we want freedom of choice, to have control over what that looks like for each of us.

But before you make those choices, you need to determine what truly matters most to you and focus your resources there. Developing a solid values structure to build your life on is also the best foundation for a financial plan. Financial planning is full of assumptions about the future, and the future is unknown, which creates a feeling of uncertainty. When making decisions in the face of the unknown, the best way to feel a sense of certainty is knowing you are making decisions based on your values. Since all we can control is our choices and not the outcomes, having confidence in the choices we make means that no matter what the outcome, we can feel good about our decisions. This can increase confidence and comfort when making difficult trade-offs.

So, I’ll ask again: Would you rather have $1,000,000, or what can $1,000,000 do for you? Choosing the latter can be all you need to start a values-based financial plan you can be sure to stick to.

This is intended for informational purposes only. You should not assume that any discussion or information contained in this document serves as the receipt of, or as a substitute for, personalized investment advice from Savant Wealth Management. There are potential limitations associated with allocating a portion of an investment portfolio in ESG securities. Please consult your investment professional regarding your unique situation.

Author Elizabeth N. Muldowney Financial Advisor

Libby has been involved in the financial services industry since 2003. She earned a bachelor of arts degree in economics from Rockford University and is a graduate of the Leadership Rockford program through the Rockford Chamber of Commerce.

About Savant Wealth Management

Savant Wealth Management is a leading independent, nationally recognized, fee-only firm serving clients for over 30 years. As a trusted advisor, Savant Wealth Management offers investment management, financial planning, retirement plan and family office services to financially established individuals and institutions. Savant also offers corporate accounting, tax preparation, payroll and consulting through its affiliate, Savant Tax & Consulting.

©2024 Savant Capital, LLC dba Savant Wealth Management. All rights reserved.

Savant Wealth Management (“Savant”) is an SEC registered investment adviser headquartered in Rockford, Illinois. Past performance may not be indicative of future results. Different types of investments involve varying degrees of risk. Therefore, it should not be assumed that future performance of any specific investment or investment strategy, including the investments and/or investment strategies recommended and/or undertaken by Savant, or any non-investment related services, will be profitable, equal any historical performance levels, be suitable for your portfolio or individual situation, or prove successful. Please see our Important Disclosures.