At our last Monday morning meeting, planners discussed the role of values clarification in our planning to help clients determine the spending that can really derive their personal happiness. Our superpowers are the “mathing” in the financial planning model that shows the trade-offs of all spending decisions, and the practice of saving ahead for big-ticket items that slows down brain dopamine.
When clients work with us, they get to uniquely see the cost of any spending decisions real-time in the model. For example, what is the cost of the house they are contemplating buying? Is the cost in the long-term, adding a few years where they could be retired? Is the cost in the short-term, not having vacations? Spending is not just a price tag on an item – it's the energy, the time, the moments that you may miss out on. A financial plan that takes your values into consideration is one that has accounted for those moments and given them back to you.
We love working with early-career physicians. They have this chance to make choices before they start down their career path that allows for them to really clarify their values and apply them to their spending. This avoids financial pain down the road.
Another part of values clarification is keeping yourself from excess. Let’s take, for example, putting in a pool. Now, pools are great. I have one and can’t wait to open it for the summer. But putting in a pool can cost anywhere between $200,000-$400,000 (and that’s not including the cost of maintenance once you have it). Our planners engage with this question quite a bit, and it comes down to: Do I have enough money to make this purchase work with the values and goals we’ve already discussed? Sometimes the answer is yes, sometimes it's “not right now.”
Our brains crave dopamine from spending, fueling a cycle known as the "hedonic treadmill." This rush drives us to keep spending, often escalating quickly. For example, buying a house may trigger further purchases—a pool for $150,000, then a faster fix like a kitchen upgrade for $50,000—each delivering a new burst of dopamine. The pattern continues, turning what was intended as a single expense into a costly habit exceeding $500,000.
Alternatively, by flowing the numbers through the model, our clients have a rare opportunity to have all their spending (current and projected) laid out in context, not just the spending decision in front of them in the order in which they arise in our lives or brains. In other words, maybe the pool makes sense, and it comes at little cost to any other expense item, but maybe in the context of the numbers in the model from the bigger picture and bigger dreams, it’s not worth it.
Financial planning, particularly early in your career, helps to regulate that cycle of dopamine rush and dopamine crash. In our process, we advocate for squirrel savings accounts that allow us to save ahead for big purchases. This creates a very natural values clarification process.
For example, I recently considered getting a luxury vehicle—admittedly influenced by driving into my kids’ private school day after day and being surrounded by them. I started putting the payments necessary for the car into a savings account. Three months in, my excitement had waned, and I realized that the car was not a passion. But I did clarify that a desire to remodel our older kitchen was more important, and it’s been much easier to save month after month. In fact, not only has the excitement not waned, it’s only grown as the savings in that account have grown.
Long-time planner Matt Duncan says when he encounters large purchases with clients, he encourages them to wait until they have the cash to do it. He has found that, over time, this has helped his clients pump the brakes on purchases that would have caused massive debt for something in the end they might not have really wanted.
Tim Quillin, our CFO, remarks that “slowing down spending is not just in big ticket items. Any slowdown on a meaningful spending decision is a big win. Personally, I notice that when I step away from purchasing something, in 2-3 months it has kind of faded away.”
CJ Rose says that he loves being able to show his clients what spending looks like in our planning model. “Like, that remodel could cost you 12 more working years – is that really what you want?”
Ultimately, the decision to spend is up to you. But hopefully, the questions you start to ask yourself turn from “Do I want this?” to “Can I afford to make this spending decision, knowing what my plan is?” And if you need a planner to ask you those questions (and show you the math), we’re here to talk.