In Part 1 of this series (shown at the link below), I introduced everyone to the first two steps towards creating a dream and life values based approach to your life, and vis a vis, personal finance. Step 1 was to determine the importance of money in your life, and step 2 was to verbalize its purpose.
In Part 2 of this series, I will walk everyone through steps 3 and 4 of the journey towards creating this type of financial plan. I will also explain how I have applied it to my life as an example.
Note: Below is a link to download the section of David Bach’s book explaining this topic (it is free) in pdf format. I would encourage everyone to read this section. It just may change your life! You never know!
Creating a Purpose Focused Financial Plan (continued)
Step 3 – Create Your Value Circle
To create your Value Circle, you will need to think of and record the top 5 most important values to you (not your friends, family, spouse, etc) that you want to focus on in the next 12 months
In this exercise, it is best to think about what is important to you at the most basic level. Another important distinction to make is that you are listing out your top 5 values. Not activities. Not material desires. VALUES. If you get stuck (like I did), there is a great list of values in page 21 of the pdf above.
Once you have them ordered. print off a copy of the Value Circle below, and list them in the 5 areas.
Do you have your top 5 values written down? Good.
Once you have them written down, reflect for several minutes on whether or not your financial actions and spending/saving patterns align with your values. Do they?
For now, don’t worry about taking action on this question. That will be the purpose of Step 4. For me, this was my big breakthrough moment. I realized that I needed much improvement in order to align my financial behavior with my set of core values.
My Results from Step 3
Listed below are my top 5 values that I came up with.
Making a difference
Question: Do my monetary behaviors match my values? Jacob: Not as much as they should.
Step 4 – Develop a Plan to Take Action on Your Value Circle Values
Up until now, you have successfully figured out the general purpose of money in your life and have verbalized your top 5 life values. Furthermore, if you’re like most people, you probably have realized that you can improve your financial behavior to “live life to the fullest.” Now is the time for action!
In Step 4, we will create a 12 month action plan that you can, and need, to take action on in the next 2 days in order to live more according to your values and less by what you “need” to buy.
Shown below is a picture excerpt from David Bach’s book that shows the template for the end product of what we will create in this exercise. Print out a copy for yourself to fill out when you are ready.
There are 6 columns to fill out (summarized below):
Top 5 Values
In this column, write down the top 5 values you identified for yourself in Step 3 above.
The idea is that you will start your plan with these values in order to take action appropriately so that you address the person you want to “be.”
Top 5 Financial Goals
In this column, for each of your top 5 values, write down down specifically what you want do “do” in the next 12 months that relates to your values.
For this section, it is perfectly OK for some of your top 5 goals to not have anything to do with financial matters.
Specific, Measurable Translation
In this column, for each of your top 5 financial goals, list a very detailed endpoint that you can hold yourself clearly accountable to reaching by the end of the year.
Basically, the purpose of this column is to go from the general to the specific.
48 Hour Plan
In this column, for each of your specific, measurable translations, list some type of action step you can take in the immediate term (next 48 hours).
Personally, I love this idea because studies have shown that even if you take a very small action step towards a goal immediately, you are far more likely to complete it.
In this column, list the names of any people you will need to turn to or lean on for assistance in realizing your goals.
Define Start and Stop Limits/Timings
This column is pretty self explanatory. However, you will want to list the dates/timings for when you will start and finish the goals for each of your top 5 values.
So, take a few minutes to complete your Purpose Focused Financial Plan worksheet (using the template above) when you get a chance.
If you’re like me, filling out this worksheet was very exciting. As you are going through it, notice how many opportunities come to your realization that you are currently not acting upon (and could be if you begin placing your life values first and foremost in your life).
Once you have filled out your Plan, be sure to place a reminder on your calendar to reevaluate your values, goals, and actions 6 months from now to see how you are doing and where you can make improvements. Document action steps required so that you don’t lose track of what you have committed to doing.
My Results from Step 4
Making a difference
Goal – Contribute 5% of my income to charity this year and a few hundred Dollars in a Microplace.com microloan to Latin America.
Make specific – Contribute $ XXX to charity in 2010 year (specify exact amount I need to donate). Partcipate in $500 microloan to Latin America using Microplace.com
48 hour plan – Total up charitable contributions already made this year. Determine how much remaining to reach 5% of income level.
Help needed – Need to find and use a good charity search engine. Additionally, when tax time arrives in 2011, I will need the accountants help to realize my tax benefits from making contributions.
Start and stop timing – start = today, end = December 31, 2010.
Goal – Do more trail running half marathons.
Make specific – Compete in 5 trail running half marathon races in 2010 year.
48 hour plan – Search for half marathons to do on www.runningintheusa.com. Find 5 specific races to target. Sign up early to commit to doing them.
Help needed – Someone to go to the races with me. TBD.
Start and stop timing – start = today, end = December 31, 2010
Goal – Travel to places in domestic US that I have always wanted to see.
Make specific – Go to the Grand Canyon and hike to the bottom during Spring Break, 2011.
48 hour plan – Set up travel savings account and determine approximate price of Grand Canyon trip.
Help needed – Ask around for friends/family that would be interested in going.
Start and stop timing – start = now, stop = when go on trip Spring Break, 2011
Goal – Go visit home in Arkansas more often.
Make specific – Visit home in Arkansas every 2 months instead of 1X every 3-5 months.
48 hour plan – Talk to family about possible trip home to Arkansas in July to see if would be feasible.
Hi folks! My name is Jacob. I am the owner and operator of My Personal Finance Journey. I started this blog in January of 2010 and have enjoyed the journey ever since. Since finishing up graduate school in Virginia in 2014, I have been working in biopharmaceutical development in Colorado. You can read more about me and this site here. Please contact me if you have any questions!