Aligning Your Money and Values
Recently, I’ve been spending more time in Tucson. Between training for bike races and hanging out with my family, I haven’t been taking as many weekend trips and traveling as often. That’s come with a healthier routine, more sleep, less laundry….and strangely some added guilt. As I continue to appreciate how special it is here, I’m realizing I want to donate more of my time to local causes I’m passionate about. Yet, where do I start? It’s overwhelming with the amount of non-profits and potential causes to dedicate my free time to. I’m incredibly fortunate to have friends and resources who can recommend how to BEST use my time and connect me with non-profits that match up with my values.
I realized that this connects so perfectly with what I do every day working with clients at TCI Wealth Advisors, as we discuss how to best define their values and align their finances with what they’re most passionate about.
So, what does it mean to truly live an authentic and aligned financial life?
Of course, this can mean different things to different people. We aim to help our clients build a financial strategy that can balance ethical investing, charitable giving, and daily lifestyle changes that align their assets with their values. Every plan is different, which is why it’s important to know what tools you have at your disposal to build a strategy that works best for your unique goals.
Defining Your Values
Your values are the foundation for your financial plan–not the other way around! Start your journey by setting aside time to understand what matters most to you. You may know your values immediately, like supporting local animal shelters or community food banks.
Next, you can expand your list of values to apply them to your daily life and finances. In general, you can live out your values by leveraging several different tools:
- Charitable donations.
- Daily cash flow and lifestyle decisions.
Let’s dig into each of these categories so that you can start to build your own unique values-aligned strategy.
Volunteer work is often a cornerstone of a values-aligned life. Spending time helping organizations whose missions you are passionate about makes an impact and helps you to leave a living legacy. Furthermore, studies about volunteerism show that volunteering can help to reduce stress through the release of dopamine and offers a sense of meaning and appreciation to the person volunteering their time and energy.
If you feel like you’re trying to make up for lost time and would like to make an impact immediately, there are several ways you can donate your time. For example, you can always pick up a donation list from the local food bank and shop for a few extra “needed” items while you’re out. Alternatively, you can make volunteering a group activity. Invite friends or choose to spend a date with your significant other volunteering.
Charitable giving is often part of a values-aligned financial plan–and the best part is there are many different ways you can incorporate it into your life.
The traditional route of charitable donations is creating a budget for giving and donating directly to 501(c)(3) organizations regularly–often annually, monthly, or quarterly. This can be impactful for the charities you’re giving to because regular donations help them maintain funding and keep their operations running year-round.
Donor Advised Funds
Another option for regular charitable giving is to leverage a Donor Advised Fund. A Donor Advised Fund (DAF) is a “charitable investment account” that offers tax benefits to investors. Investors can donate funds on a consistent or one time basis to their DAF and become immediately eligible to take a tax deduction based on their contributions. Once donated, the funds can continue to experience tax-free growth–and they can be distributed to qualifying charities at any time. In a sense, this is allowing you to maximize your charitable giving by minimizing your tax burden while also growing the total sum you’re able to donate.
Qualified Charitable Distributions (QCDs)
Did you know that you can take your Required Minimum Distributions in retirement and donate them directly to charity? Qualified Charitable Distributions (QCDs) allow you to donate up to $100,000 (per person, per year) directly to a charity of your choice from your IRA in lieu of taking your standard RMD. Although the contributions are not tax deductible (no double dipping on those tax benefits), they can reduce your taxable income in retirement and the amount for future RMDs.
Donating Appreciated Stocks
Donating appreciated securities can be a way that investors minimize their tax liability while also providing a high-impact donation to a charitable organization of your choice. Many organizations are set up to accept appreciated securities as a donation, and doing so can be a more tax advantaged strategy than simply writing a check.
Socially Responsible Investing
I wouldn’t be living my values if I didn’t also give a plug for Socially Responsible Investing (SRI) investing which is another way investors can make an impact. SRI goes by many names–Environmental, Social, Governance (ESG), impact investing, or ethical investing, to name a few. We’ve covered the basics of SRI in a previous blog post. The exciting thing about SRI is that, through investing to reach your long-term goals (think: retirement saving) you can also align those investments with your values.
SRI focuses on investments that consist of low-cost ETFs and mutual funds that filter out companies who don’t pass a long list of widely accepted ESG criteria. These criteria may include:
- Climate change/carbon emissions
- Water scarcity/usage
- Waste management
- Biodiversity protection
- Energy efficiency
- Human rights
- Labor conditions
- Cybersecurity and data protection
- Employee engagement
- Diversity, equity, and inclusion
- Customer satisfaction and consumer relations
- Audits/board of directors involvement
SRI funds screen out companies that don’t meet these criteria and focus on organizations that are making strides in these areas and doing business in an ethical way. The best part is, since the dawn of SRI several decades ago, popular funds have come a long way. Now, low-cost funds are readily available to investors, further diversification, and their performance can be on par with a non-SRI fund (note: this isn’t to say that SRI funds outperform non-SRI funds, just that investors don’t necessarily have to “sacrifice” performance for ethical or impact investing). Please feel free to reach out to your TCI Advisor if you’d like to understand more about the differences between traditional and SRI funds.
Bonus: If you choose to combine ethical investing and charitable giving, you can leverage SRI funds in Donor Advised Funds to further maximize your impact.
This is possibly the most exciting step in aligning your values with your financial journey–changing portions of your daily lifestyle and relationship to money to increase the impact you can make. This is truly where the rubber meets the road.
Let’s look at an example* that showcases how your everyday decisions can make an impact.
Charesse and Andrew Reynolds: The Impact-Focused Pre-Retirees
Charesse and Andrew Reynolds are five years out from retirement, and they’ve been long time clients of TCI. My team and I have spent countless hours with them creating financial strategies that help move them toward their goals while balancing the impact they want to make on the world around them and the environment. Charesse and Andrew are passionate about conservation and education. They bike to work when they can, volunteer at a local regenerative farm co-op, donate to a DAF, and incorporate ESG funds into their portfolio. However, they expressed interest in doing more.
So, we started looking at how their budget could further reflect of their values. Here’s what we came up with:
- Charesse signed up for a local Community Supported Agriculture program where she can now get her meat and vegetables from local farmers who use regenerative practices that reduce their carbon footprint, treat animals humanely, and grow organic produce–yum!
- They took time to be intentional on the front end of their charitable giving this year and connected with the Community Foundation of Southern Arizona. This wonderful group does a wide variety of things for the Southern Arizona community, including researching organizations and categorizing them to make donating easier for investors–and to give smaller organizations more exposure.
- Andrew knew he’d need a few updated business wardrobe pieces for returning to the office–he’d been enjoying working from home in jeans and t-shirts, but an update was in order. He explored used and thrifted options to reduce his footprint and to limit his contributions to the fast fashion industry.
- Instead of only contributing to charitable organizations and causes, Charesse decided to get involved in a community education organization that provided tutoring and after-school activities to children in underprivileged communities.
After implementing these small changes and others, living in alignment with their values became even more fulfilling. In fact, I recently got a call from Charesse and Andrew. We knew they were in need of a new vehicle soon but didn’t want to buy something new. They landed on a used electric vehicle, and it was the perfect solution for balancing their transportation needs, budget and values-oriented goals.
Building a Plan That Works for You
Realistically it’s never one thing that makes a holistic values-aligned financial plan. The key is finding a combination of several puzzle pieces that fit together to create your unique alignment. Additionally, you may find that your strategy needs to shift over time as your capacity to engage, values and other goals change–that’s okay too!
The best thing you can do is to:
- Evaluate your current values and goals.
- Create a list of ways those values can show up in your finances and your lifestyle.
With so many different tools at our disposal, together we’re bound to create a dynamic strategy that works for you and helps you to make the impact you want to make.
I’m so excited to start reaching out to some non-profits this year and dedicating some weekends to a cause I care about. Along the way, I’ll be meeting new people and engaging more in the Tucson community!
Partnering With An Advisor
If you feel like you need guidance, or a framework for creating a values-aligned financial strategy, TCI Wealth Advisors can help. Contact your TCI Team to learn more about how we work with clients who are passionate about making an impact.
*All examples are fictionalized to protect the personal information of our clients.