Money: What's Its Purpose in Our Lives?

Investment / Savings
Early Career
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Back from holiday or a big spend, did it fulfil its purpose?
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How do you value your life?  Do you do it in terms of pounds and pence?  I earn £40,000 a year, so is that how much I’m worth?  My house is worth £200,000, so maybe that’s how much.  My pension fund is even bigger than that…Wow, I’m worth a lot today and I feel great! No.  Most people value their lives in terms of the impact they make and the relationships they are in, not the size of their bank balance.


Why then, do we spend so much time focussing on the money?  Money for some is a scorecard, a way of comparing your ‘success’ to that of your friends, your colleagues, your neighbours.  


Working with a financial planner can help you value your money in a different way, and can help you improve the real value of your life.


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Money is not an end in and of itself.  Money is a means of achieving the goals and objectives that you set yourself.  Money is therefore a tool, and using it effectively will help you generate true value in life. Consider the following goals and objectives and see if you would choose any of these in your own life:


  • To buy a house;
  • To pay off a mortgage (and be debt free);
  • To help support children (or grandchildren) through education;
  • To retire (or perhaps retire earlier than the State Pension Age with a comfortable income);​
  • To have time to do more of the things you love (theatre/golf/travel/charitable work)


Whatever your goals, these can generally be broken down by priority and by timescale.  In the first instance there are short term, high priority goals.  These are things like paying the bills and fixing the car. You have to spend money on these and the need is right now, so your money gets allocated to these needs first.


What should come next are your long term, high priority goals, such as paying off the mortgage and building a retirement fund.  When you take time out to consider them you realise that these goals are really important to you, but because they are far off it’s more difficult to allocate money to them.  You feel far more excited about spending money on this year’s holiday or a new car than you do about putting money into some kind of investment that you won’t touch for twenty or thirty years.


Herein lies one of the issues when valuing money.  There is a behavioural bias to focus on our short term pleasure rather than our long term needs.  The same £100 can be used to give you a lot of short term pleasure, a meal out or some new clothes.  That same £100 feels insignificant when put into your pension.  It just gets absorbed into the ‘pot’ and you never see it again (or at least, until you retire or turn 55).  The discipline a financial planner can instil is to change how you value those high priority but long term goals.  


When you verbalise your priorities, ‘I want to support my child through university’, and then write them down, they become more real, more tangible.  A planner can then help you formalise these goals, establishing how much money you will need to establish the goal, for example, you might need £20,000 per year in today’s money to put a child through University.  Then they can help you work out how to fund that goal.  ‘If you save £100 per month for fifteen years, and if it grows at 3% above inflation after charges, then you will be able to save up that £20,000.’  Suddenly the value of your £100 is not how many Lattes it will buy, but it is the education you are ‘buying’ for a child.


Over your lifetime you will constantly face competing calls for your money.  


When you start to think this way you begin to be more deliberate with your money, you become more purposeful.  Giving each pound a purpose can help you to prioritise what you really want to spend your money on.  This can lead to financial freedom, rather than the daily grind of working harder, to earn the money, to pay for the things, that don’t do a very good job of compensating for all that hard work you’re doing.


Why not try being more purposeful with your money today?


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