A Tale of Two Statements

Let’s play a game. 

Imagine you have just inherited $20 million. You are now financially independent and work is optional. What would you do differently now that money is no object?

What does next week’s schedule look like? Do you go fishing? Start writing your first book? Fly to Hawaii? Volunteer at a local shelter? 

Removing the obstacle of money gives you insight into what really matters to you. All of the sudden, you can imagine yourself doing only the things you want to do instead of what you think you have to do.

Now here’s the follow up question… why aren’t you doing those things (or working towards them) right now? 

You see, everyone tells two stories about the purpose of money in their life. The first story is the one you tell yourself, and the other is the one your money tells.

Let me explain…

1. Statement of Financial Purpose

My job is to talk to people about their money.

Whenever I sit down to have an initial money conversation with someone, the first thing I want to do is to identify their “Statement of Financial Purpose”. 

Simply put, it’s a sentence (or two) that describes how you want to use your resources.  Most people have never thought about their Statement of Financial Purpose; therefore, it takes a little work to uncover it.

In that first conversation, I always ask the same question: why is money important to you? 

This is probably the most important question in the whole conversation. It’s even more important than how much money you want to have when you retire, how much life insurance you need, your investment return, or what type of account to use. Because in order to accurately answer any question with a dollar sign attached to it we need to get clear about the “why”. 

Why is money important to you?

Sometimes the initial answer is, “Well, it takes money to live!” or, “Money is just a tool”. Very true, but we need to go deeper. Like an onion, the answer to this question is layered. 

Them: I need money to pay my bills

Me: Right, and why is it important to see your bills are paid?

Them: Well, I need to take care of myself and my family’s needs

Me: And what does taking care of your and your family’s needs look like to you?

Them: Growing up, there was always uncertainty about money and whether we were going to make it. I don’t want my family to have to deal with that same pressure. 

Me: That’s good. I think we’re getting to it. Tell me more…

Them: I guess I would say that money is important because it helps me provide stability and security for my family

Now we’re getting somewhere! 

Everyone’s statement of financial purpose will be a little different. If you struggle with developing your own “Statement of Financial Purpose”, let me give you a good way to start. The purpose of money in my life is to ___________. And you fill in that blank

Here are some examples…

Never be a burden to my kids and leave an inheritance

Share experiences with my family and raise responsible, independent children

Give generously and spend time with my family

Travel and do missions work 

Provide security and stability 

Have a flexible schedule, travel with my family, serve churches, and give generously (that’s mine!)

Take some time and consider your own Statement of Financial Purpose. What role do you want money to play in your life?

Now that you’ve clarified the role of money in your life, it’s time to get really clear about where you are right now. That means taking a closer look at your current financial picture. 

2. Financial Statements

I’m a big proponent (if you couldn’t already tell) of having a Statement of Financial Purpose. But that’s all it is: a statement. 

The next step is to see how you currently use your money. How much do earn/save/give/spend? How much of your money goes to debt, taxes, retirement, etc.? 

Your Statement of Financial Purpose tells a story. But your financial statements may tell another story. 

Unfortunately, there is often a large gap between what we say is important to us and how we actually behave!

We may say that we want to be generous, save for the future, pursue a new hobby, spend time with family, and volunteer. Meanwhile, we spend our money on everything but those things.

My dad would often say “Show me your checkbook, and I’ll show you your priorities”. (Apologies to readers under the age of 30 who have never owned a checkbook. Ask your grandparents and I’m sure they’ll be glad to show you their’s!)

The question we must all ask ourselves is who is telling the truth: me or my money?

Do you really care about the values you thoughtfully outlined or does your spending reveal otherwise that restaurants, Amazon, iPhone upgrades, new shoes, and upgrading your car every 3 years are actually most important to you?

Only you can answer that question. 

If you want to make more meaningful and impactful money decisions, then you need to consider the Tale of Two Statements. 

The journey to financial health begins with aligning your use of money with what is actually most important to you. 

Written by Nathaniel Skelly