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7 ways to find your financial heart

Understand what role money plays in your life

By Karen Datko Sep 23, 2009 7:31PM

This guest post comes from Wojciech Kulicki at Fiscal Fizzle.


A critical skill for a fulfilling financial life is understanding your own money priorities. Without taking this first step, it's like driving without a destination -- you will simply end up wherever the road takes you.


I've touched on the topic of setting priorities in a number of past posts:

Now I'd like to take a more detailed approach and propose a list of seven independent activities that will drive you to find what's at the heart of your financial desires.


I guarantee that doing even one of these will bring you much closer to understanding what you value and aligning your daily actions with where you'd like to finish. It's worth the effort.


Consider these seven individually, or as a group:


Cut your income in half. For this exercise, you'll need to pull out your latest family budget and update it, if it's not current. This establishes an accurate baseline from which to work.


To enter the scarcity mindset, imagine that your total household income has just been reduced to half of today's level. It's not so far-fetched, as both two and one-income families are finding themselves partially or totally unemployed.


Create a theoretical budget based on the new income level. Unless the space between your current income and expenses is wide, you'll really have to focus and trim down.


You may want to refer to my needs vs. wants hierarchy for this exercise, and fulfill each level before moving to the next.


Increase your income by 50%. While similar to the previous example, this trick will have you thinking in an abundance mindset instead. This is sometimes called creating a dream budget. You'll also need a baseline to start with here.


To begin, imagine that you just received a raise adding 50% to your income. I chose 50% because doubling your income seemed excessive, but you can just as easily use a number more beneficial for your own situation. Then, start filling in the blanks of your budget until you've balanced it again.


Creating a dream budget has a couple of benefits. Primarily, you'll break out of a survival mindset and start thinking about where your priorities lie with discretionary income.


It will also motivate you to reach that level of income so you can actually fulfill your dreams. Lastly, having a dream budget in place helps when you receive a raise. You'll know exactly where to budget the extra cash.


Look into the crystal ball. Another priority-setting strategy is to think to the future. Many self-help experts like to go as far as imagining your funeral, but that's pushing the boundary for me. Ten to 20 years down the road is far enough to gain a good deal of perspective.


This exercise helps you forget about the mundane elements of day-to-day living and focus on achieving long-term goals. The idea is to visualize where you'd like your financial life to be in that period of time and to translate those thoughts into actions.


Typically, most people stop there, but it's also critical to examine the things you're currently doing or stressing out about that don't contribute to that long-term vision, and eliminate them from your life.


Apply your life goals to your finances. An easy way to cheat on this exam is to copy from your existing life goals list, assuming you have one in place. If this sounds far-fetched, let me give you an example. Let's say you've set up four goals related to your health. Perhaps they are to:

  • Lose 15 pounds by Dec. 31.
  • Avoid eating red meat on 50% of the days in this year.
  • See a preventative care doctor at least twice this year.
  • Undergo a procedure for tooth alignment.

It's a well-rounded list that consists of both well-defined and loosely defined goals, and spans a wide range of issues within the general health category. Look at how I can take the above list and use a similar framework to set some financial goals:

  • Pay off an extra $1,500 in student loans by Dec. 31.
  • Avoid spending any money on 50% of the days in this year.
  • See a financial adviser at least twice this year.
  • Evaluate the asset allocation of my portfolios in detail.

It's no guarantee that your goals will translate cleanly, but it's a start if you're stuck, and the wonderful thing about goals is that they can be modified as you learn more, and your life evolves.

Ask probing questions. The trick is coming up with questions that are truly out-of-the-box, thought-provoking, and focused on progress and the future. A great list can be found in my previous post on joint goals, but if you need to push the envelope even further, dig deeper.


Try breaking up your life into various roles and examine them individually. Think in terms of different time frames (five years, 15 years). Get your entire family, or even your friends, to brainstorm with you.


Answer some of the questions you put together in detail. More often than not, the answers themselves will breed more questions in a self-perpetuating cycle that helps to fill the gaps of your life.


Understand your defaults. When I wrote about setting financial priorities, I mentioned that you don't have a lot of options when it comes to your money. You can pay for services, buy products, save, eliminate debt, or invest. That's about it.


Understanding your default mentality is important, because it gives you insight on where you tend to lean when you have the freedom to choose with your discretionary income. That helps in the same way as exercise No. 2 when extra income becomes available.


It also helps you examine whether your default is actually what you want. For example, you may lean toward buying products, when in reality investing is a better option for achieving your goals. Simply knowing this may be enough to consciously stop the unwanted behavior in the future.


Give yourself a bit of imaginary income and watch your mind go to work. Do you immediately hit the mall? Stash it away in your savings account? Do you carefully split the money among all groups?


Find your MIC. MIC is an acronym I just invented that stands for "most important charity." When I was talking with my boss recently, he remarked that "we had to be put on this earth to make a difference." In other words, there's something beyond the four walls of our home that needs our attention.


It may take significant effort to find that single charity that speaks most to your heart, or it may be so second-nature that you already have one in mind. The process of looking for and selecting a single charity is very important, even if you don't have the funds to support it right now.


It reflects on your interests and passions, and gives you motivation outside yourself to succeed in life and be able to support something you care about.


Your financial heart

The ability to be self-aware beings is a uniquely human condition, and one that many of us don't take full advantage of. Figuring out what we value when it comes to money should not be an afterthought -- but the opening act.


Without the ability to understand why and how we think, we are simply living the cycle of the day-to-day. It would be a difficult task to accomplish anything of value with that mentality.


I encourage you to take on at least one of the above exercises today and begin building your financial heart.


Related reading at Fiscal Fizzle:



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