Mitch Anthony is the author of “The New Retirementality“, a book we often give to clients considering retirement. He has a nice article in the November issue of Financial Advisor Magazine entitled, “A Life Well Spent.” The point of the article is that life planning is where comprehensive wealth management ought to start. Life planning conversations with clients, while not as frequent as the day to day financial planning, are nevertheless the most meaningful and potentially life-changing discussions.

When trying to raise financially savvy children, there are three things they need to learn: how to earn money, how to save and invest money, and how to spend money.

You might think that people don’t need to learn how to spend money. They do it naturally. Unfortunately, the way they naturally spend money is mindless spending.

The problem with most spending is that our actions are not consistent with our values.

The poor buy things; their homes are cluttered with them. The middle class buy liabilities like second homes and boats, and then they are obliged to make payments on and maintain them for years. In contrast, the rich buy investments that appreciate and pay them dividends and interest for decades.

The problem is not just that the poor and middle class are not wealthy. The problem is that the poor and middle class are often not using their money to satisfy their values.

Mitch Anthony’s article references a book by Elizabeth Dunn and Michael Norton which chronicles the “research distinguishing spending that satisfies from that which disappoints. The authors lay out five principles of spending that produce lasting dividends:

1. Experiences are more satisfying than stuff.

2. Abundance ultimately backfires. Making indulgences rarer rather than frequent makes them more satisfying.

3. Buying time is the best investment.

4. Using “reverse credit” (pay now––use later) imbues us with the pleasure of anticipation rather than the buzzkill of paying later for something already consumed.

5. Spending on others trumps spending on oneself.”

This seems like a good starting place for judging money well spent.

I’ve often described the idea that if you were in charge of a group of people ship-wrecked on an island and you only had one doctor, you would “buy” his time by having other people cook for him, keep his house in order to free him from any duties other than doctoring where he is the most valuable. Many wealthy people are wealthy because their time is extremely valuable. If they are smart, they do not cook for themselves, or mow their own lawns or perhaps even drive themselves to work. They buy time by paying others to do those things for them, and as a consequence use their time in a more valuable way.

The same principles applies for anything that only you can do. You are the only person who can be a mom or dad to your children. Buying time to make those relationships happen is a great life-planning investment.

If you have children, print a copy of these five principles and discuss them at the dinner table. Such conversations are one of the ways we impart values to our children and financial planning begins with spiritual values. Life goals may fall into one of several types, but since the course of your life is unique, the way you handle your money to help you in your calling will be tailored to you as well.

Aligning your money and your values isn’t a easy process. It is as difficult as aligning your eating and your health.

Photo used under Flickr Creative Commons.