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David Bach The Automatic Millionaire

David Bach, The Automatic Millionaire

Synchronizing Your Finances with Your Values

by David Bach

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Posted on Friday, December 28, 2007, 12:00AM

Why is it that we make the same resolutions year after year?

A recent survey by FranklinCovey revealed that the No. 1 New Year's resolution people will make for 2008 is to get out of debt and save more. (Losing weight is No. 2 and exercising is No. 3.) No surprises there. The results also revealed that 77 percent of those surveyed won't stick to their resolutions, with 35 percent breaking them by the end of January.

Benjamin Franklin once said that the definition of insanity is doing the same thing over and over and expecting different results. If you find yourself hoping that this is the year you'll finally get the results you want, I challenge you to do more than just hope. Ditch that list of resolutions once and for all and instead follow my seven steps to create your Purpose-Focused Financial Plan for real success in 2008:

1. Ask yourself what matters.

When you think about your life and the things that really matter, what values are most important to you? When you take the time to explore the answers to this simple question, you'll be creating so much more than a list of New Year's resolutions.

In fact, it's my experience that when it comes to their finances, people will do more, and act more quickly, when they have a clear understanding of how their actions relate to their values. Values are a lot more powerful than any sense of obligation.

2. Identify your top five core values.

The truth is that people will do more to protect their values than just about anything else in life. Values are not to-do lists in disguise. And unlike traditional New Year's resolutions like "save more," "spend less," or "lose weight," people don't lose their motivation or get bored with their values. Once you've defined your top values clearly and commit them to paper, they almost never leave you.

For this step, it's important to stay focused on values -- not goals, not things, not stuff to do or buy. Values are about being; they define a way of life. Goals tend to be about doing and having. For instance, you might be tempted to list as a value "pay off all credit card debt." But that's not a value; it's a goal. The underlying value in this case would probably be security or freedom -- even peace of mind. Paying off credit card debt is just a way to fulfill that specific value.

Other examples of values include health, love, balance, confidence, fulfillment, making a difference, independence, happiness, adventure, family -- you get the idea.

3. Use your values to figure out your financial goals.

The clearer you are about your values, the easier it is to base your goals on them -- and the more you base your goals on your values, the more likely it is that you'll achieve them. After all, can you think of anything better or more exciting to plan your finances around than the things that really matter to you? And what could matter more than the values by which you want to live and grow?

Ideally, each of your top five values should lead you to a specific, key goal. So next to each value, list a related goal on which you want to focus your time and energy in 2008.

4. Make your goals specific, detailed, and deadline-driven -- and write it all down.

In order to achieve a goal, you must know precisely what it is you're after. This process will help you take those vague ideas and thoughts about what you want to accomplish in the coming year and turn them into something concrete.

Say one of your values is "family." You want to spend more quality time together and your goal is to buy a vacation home where you can all congregate each summer. You could write "own a vacation home" on your list, but what would that accomplish? Not much, because a general phrase like that doesn't help you focus on what you need to do to accomplish your goal.

Instead, ask yourself specific questions like: Where do I want this vacation home to be located? How much will it cost? What steps will I have to take to make this happen? When can I take action and begin working toward my goal? How long will it take to make my vacation home dream a reality? Once you can answer these types of questions, your goal will start to feel real and exciting.

So far you've identified your values, connected a goal to each value, and turned your goals into specific, detailed plans of action. Now write it all down. When you write down your goals, you make them important. When you write down important goals, you make your life more purposeful.

5. Take action toward your goals within 48 hours.

Writing down your goals is great, but it's not enough. You must take action, and the quicker the better. That's because if you don't start moving toward your goal now, you may never get moving at all.

Identify at least one step you can take within the next 48 hours. It can be anything -- all that matters is that you do something to bring yourself closer to your goal. In the example of the vacation home I mentioned in step 4, the action you could take now is to go online and start researching the housing market in your ideal destination.

What you do in the next 48 hours isn't as important as just making sure you're doing something. That's because your action creates positive momentum that will help carry your goal through to reality.

6. Enlist help.

There's no such thing as a self-made person -- no one ever reaches an important goal without some sort of help from someone else. It's part of being human. To whom can you turn for help in achieving your top five goals? Perhaps family members, friends, people you work or socialize with, or people with a specific area of expertise related to your goals.

But don't stop there. Consider working with a qualified financial advisor to really get serious about achieving success in 2008. Or look into working with a money coach -- someone who will hold you accountable and help you stay motivated throughout the year. I personally have found coaching to be the most effective way to get from where you are now to where you want to be.

7. Include your partner and family.

Finally, if you have a partner or family, it's important to make sure your Purpose-Focused Financial Plan reflects what they want, too. By discussing your values, dreams, and goals with your loved ones, you help create a future together.

When your partner and children are all working with you toward common goals, you increase the likelihood of your success that much more.

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25 Comments

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  • Yahoo! Finance User - Thursday, January 3, 2008, 11:35AM ET  Report Abuse

    • Overall: 3/5

    Well, at least Bach avoided dispensing more of his horrible housing market advice this week.

  • Yahoo! Finance User - Wednesday, January 2, 2008, 4:15PM ET  Report Abuse

    • Overall: 5/5

    Trying this again: GMJCliff, there's more to personal finance than investing. I logged on today to find some articles about SRI so thank you actually for the link. But I beg to differ about your comment about the article falling short. It doesn't at all. It's not about investing. Read deeper GMJcliff. Thanks anyway for the link.

  • Yahoo! Finance User - Wednesday, January 2, 2008, 4:12PM ET  Report Abuse

    • Overall: 5/5

    Yahoo! You've got to get this comment section fixed for 2008. I posted a comment and now it's not showing up. This is the 4th time this has happened! Can you make it your resolution to fix this site!?

  • Cliff - Wednesday, January 2, 2008, 3:59PM ET  Report Abuse

    • Overall: 3/5

    As the co-author of "Investing with Your Values: Making Money and Making a Difference" I feel this article falls a bit short. There are now over 200 funds that invest in socially and environmentally responsible companies. These fund help people align their money with their values. Also shopping with your values can powerfully influence the marketplace. Check out the GreenMoney Journal at- www.greenmoney.com to see how to make money and make a difference in the world. A triple bottom line of People, Planet and Profit. =====

  • Yahoo! Finance User - Wednesday, January 2, 2008, 3:47PM ET  Report Abuse

    • Overall: 4/5

    "And unlike traditional New Year's resolutions like "save more," "spend less," or "lose weight," people don't lose their motivation or get bored with their values." SO TRUE. I've never heard this expressed before but it makes a lot of sense.

  • Yahoo! Finance User - Wednesday, January 2, 2008, 3:44PM ET  Report Abuse

    • Overall: 5/5

    Ok David. I took action. I upped my 401 k contributions for this year. I went for the max of 15% and it feels great! Thanks for the push! And Happy New Year.

  • Yahoo! Finance User - Wednesday, January 2, 2008, 3:40PM ET  Report Abuse

    • Overall: 5/5

    From life changings stories from his grandma to solid recommendation for organizing your financial life, David Bach has been one the brightest stars of this editorial. I trully enjoyed reading it and it certianly revealed new ways of approaching our financial and personal lives. Thank you again.

  • Yahoo! Finance User - Wednesday, January 2, 2008, 1:55PM ET  Report Abuse

    • Overall: 1/5

    Is this really an article. How about telling us which companies line up with our values. Anyone can come up with a magic plan, but can you do some reseach and help us to know which companies are Christian, green, Liberal, or conservative so that we can back our values with our investment $.

  • Yahoo! Finance User - Wednesday, January 2, 2008, 11:26AM ET  Report Abuse

    • Overall: 5/5

    I read Smart Couples Finish first over 5 years ago and it truly helped to not only save my finances but save my marriage as well. Highly recommended.

  • mm - Wednesday, January 2, 2008, 11:21AM ET  Report Abuse

    • Overall: 5/5

    What a great way to start the year. Great stuff.

  • Yahoo! Finance User - Wednesday, January 2, 2008, 8:21AM ET  Report Abuse

    • Overall: 3/5

    Nice article to start the year. I guess he's out of Automatic Millionaire material. If anything my values goes against his Automatic Millionaire philosophy of pinching pennies. I watch my spending but I also enjoy a latte now and then. My other values include not stomping on others to get ahead. I've spent much of my career being everyone else's stepping stone to their success. Despite that, I don't care to imitate their actions. I've started a consulting business where I can be my own boss and operate my business as I see fit, even if it means making a little less money. Although, in the end, sometimes people who provide quality work with integrity often do better than their greedy, bottom line oriented peers.

  • Yahoo! Finance User - Wednesday, January 2, 2008, 12:32AM ET  Report Abuse

    • Overall: 5/5

    Excellent starting point, and it's good to see a discussion about values in a financial forum. It's not just about the money.

  • spinaltap58 - Tuesday, January 1, 2008, 8:00PM ET  Report Abuse

    • Overall: 1/5

    Automatic Millionaire is a hoax. Remember when he pushed investing in 1/3 real estate (Reits) ,1/3 bonds & 1/3 stocks? Thats all you have to do. Well what a losing combination this has turned out to be.Somebody better fire this dude before he gets someone hurt.

  • Yahoo! Finance User - Tuesday, January 1, 2008, 6:42PM ET  Report Abuse

    • Overall: 2/5

    he insanity quote is variously attributed to both Einstein and Franklin, with little if any evidence that either of them said anything so stupid. Do you have an actual citation Mr. Bach? What about flipping a coin? Can I do that over and over expecting a different result? What if my values "instant gratification" and I spend money as soon as I get it? Should I take action on thise values? Or should I re-think them in light of the fact that someday I may need to retire?

  • Bernard - Tuesday, January 1, 2008, 4:13PM ET  Report Abuse

    • Overall: 4/5

    Thank you for the suggestion. I think I am going to go against all the do-gooders of the religious or liberal variety and invest in the Vice fund (VICEX) whose performance has been spectacular. I would also like to see a Trash The Planet Fund which would go against Al Gore and his minions by investing in oil, coal, mining companies, and heavy truck manufacturers.

  • cowboy47201 - Tuesday, January 1, 2008, 1:08PM ET  Report Abuse

    • Overall: 2/5

    Although this sounds good and many people like Covey advise this, in my experience of consulting to companies, what we state as values is not the same as the ones we live. When I conducted my "values exericse" much like this one, managers all said they value things like integrity, honesty, competence, teamwork, etc. In practice, they mostly valued, getting ahead, making more money and most of all being in control. Most humans are pretty unconscious to our operating values, and the only way to become aware is self observation. Once you really understand your values, then you can do this little exercise.

  • Yahoo! Finance User - Tuesday, January 1, 2008, 11:33AM ET  Report Abuse

    • Overall: 5/5

    Most people don't achieve their dream because they get sidetracked by the details of life and the unwillingness to make compromises. In my case I liked my job but resented the lack of free time it allowed From my first year out of college I knew I wanted to retire as early as possible. I never got married, most women I met wanted kids and did not share my willingness to sacrifice for the future. I drove used cars I bought for cash, and live in a rather plain house which I paid off years ago. Most observers would think I am rather poor from the way I live. I seldom call a plumber, electrician, carpenter, or take my car to the repair shop, when a job needs doing I learn how to do it myself. I have never used financial planners, I educated myself over the years and kept the substantial fees they would have charged for myself. I retired early 3 years ago and have never been so happy. You can achieve your dream but you must make some hard choices and not just "let life happen".

  • Ally0005 - Tuesday, January 1, 2008, 7:30AM ET  Report Abuse

    • Overall: 4/5

    Interesting, never thought about it that way.

  • Lilia Rios - Tuesday, January 1, 2008, 7:17AM ET  Report Abuse

    • Overall: 5/5

    An Excellent and Well Balanced approach for meeting the financial objectives of life and retiring with substantial financial freedom and peace of mind. It will definitely provide Gen-X enough wealth to meet the turbulent years ahead in US economy. i am pretty sure a methodical approach like this one if applied collectively can provide stability and hedge to the economy against the unknown nightmarish fears

  • Andrew - Tuesday, January 1, 2008, 3:58AM ET  Report Abuse

    • Overall: 5/5

    Really good and specific advice, as long as people actually take it to heart and follow it. Much of what he says can be applied to other life ambitions as well, career and personal. People tend to be a lot more successful in getting what they want when they define what they want, lay out the steps they need to take to make it happen, and hold themselves accountable for taking those actions.

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