Posts Tagged ‘Charity’

The Spending Pyramid: Personal Values and Financial Planning (Part II)

In yesterday’s article, we were able to explore the structure of a spending pyramid a la Robert Pagliarini.

Pyramid_Fig2

Based on Dan Pink’s lecture on motivation (which I embedded in another article), there are three human motivating factors.

  • Autonomy – The urge to direct our own lives
  • Mastery – The desire to be better at something that matters
  • Purpose – The yearning to do what we do in the service of something larger than ourselves

As you begin to think about what motivates you in general, you will be able to rearrange the middle portion of the pyramid (in between basic expenses and miscellaneous expenses) to conjure up a picture that aligns with your own values.

Autonomy: Your Money and Yourself

SPPyramid2_1 Image courtesy of Flickr

If directing your life is what motivates you then debt reduction, financial independence and personal improvement will rank high in your pyramid. The most important thing to you is being in control of what happens in your life and blazing your own path. Therefore, neither owing money to credit card companies nor retiring while being financial dependent sit well with you. As such, most of your spending will be directed at your money going mostly into your pocket prior to anything else.

Purpose: Your Money and Others

SPPyramid2_2Image courtesy of Flickr

For some, being financially fit is the means while the end is the ability to serve others and the community. If the realization that there’s more to life than your own needs, then donations to church and charity will rank high on your list. Those who attend church have a set value at 10% (tithing) and will also donate in others ways. Even if you don’t attend a church, you find that donating towards a cause brings about a certain kind of satisfaction. In addition, these donations can also be used for tax deductions.

Another area not reflected in the pyramid is provision for family (both immediate and extended). I told a story of how my father laid the foundation for my siblings and me to go to college. That couldn’t have happened if he didn’t believe that part of his purpose was leaving a legacy to his children.

Mastery: Your Money, Yourself and Others

SPPyramid2_3Image courtesy of Flickr

Sometimes, motivation lies in being better at something for the sake of just being better (epitome of kaizen). Two of the most popular New Year Resolutions in the U.S.A. are managing debt and saving money. Hence it would appear that most people would fall under this category as most believe that finances matter. This belief combined with the desire to understand finance could be a motivating factor for another set of people. Therefore, Goals and Emergency Reserve would rank higher in your pyramid. Goals motivate towards reaching a pinnacle while mastering personal finances starts with being prepared for emergencies. Personal Improvement would also fall under this category as mastering finances would include studying financial matters and learning from others.

Most of the time, personal motivation will come from a combination of two or all three factors and therefore you will find that your values overlap. In the end, the final picture is letting the things that motivate you in life also motivate shaping your finances. Create your own picture and it will lead to spending habits that are aligned with what you think is important.

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