I was writing early one morning about motivations and I think that I touched on why clients often have difficulty making money decisions that help them feel good.
If I am doing something for the recognition or praise from someone, I am being self-serving; if I am doing something simply to get in someone's good graces, I am acting insecure; if I am giving something to someone because I feel that it would mean something to them, I am being generous; and if I am doing something for someone because I want to remove their suffering, I am being compassionate.
This matters in financial planning because many of our financial decisions parallel these motivations. For example, clients are frustrated when they give money to their children, the kids don't show their appreciation. Business owners are discouraged because benefits that they give to staff are not received in the manner they were intended. But when they tie recognition to the act, it makes it more self-serving. If they are just doing these things in order to be praised, then they may want to decide whether these are the right things to be doing. If they are doing what they believe to be right, they would want to do it regardless. In her book, "The Power of Meaning", Emily Esfahani Smith would describe this as "eudaimonia. seeking to use and develop the best in oneself in a way that fits with one's deeper principles."
When clients make spending decisions that are not consistent with how they see themselves, they may be doing so in order to present a picture that matches their image of success. But often these choices lead to the spending stakes continuing to get higher. Status insecurities cannot be remedied through purchases.
The motivations of generosity are regenerative. Esfahani Smith writes, "Meaning arises from our relationships to others, having a mission tied to contributing to society, making sense of our experiences or who we are through narrative, and connecting to something bigger than the self." Some of our physician clients spend time in developing countries providing free medical or dental care. These service trips change their personal relationship with money because of the dire conditions of those they are serving. But generosity and service can happen every day at home simply by how we treat those with whom we come in contact.
The challenge is to find the balance between wanting things and being in service to others. Being aware of your motivations will make your choices more meaningful.
Spend your life wisely.
Ross Levin is the founding principal of Accredited Investors Wealth Management in Edina.
