Written by Lee Stoerzinger, CFP®
There’s a lot more to money than just investments and markets. There’s also a human side – how people actually think and feel about money. Understanding this piece is extremely important in financial planning and it’s what our team is known for.
Years ago, we pioneered a concept called The Four Quadrants of Money designed with the basic understanding that money is not only financial, but also intellectual, emotional and spiritual. Using this framework as our guide, we are able to understand what our clients truly value – what matters to them the most – and build custom financial plans to support their goals.
When we think about money, it’s easy and obvious to see it’s financial. It’s how we think about saving, budgeting, investing and living. This financial piece is often what is taught in schools and passed on from family members. It’s what we read and follow in the media. It’s what we “know”, the utilitarian view, so to speak.
As we move to the next part of the quadrant, we come to how we process and reason - the intellectual piece. If the financial side is what we “know,” then the intellectual side is what we “think.” When we look at the markets and wonder what we should do or when we determine the appropriate amount to save, this is our mind sorting through everything to come to a conclusion. It is our higher-level logic.
This piece is often the hardest to understand and control. Think of all the bad money decisions people make or how difficult it can be to handle stock market volatility. We know we should do one thing, but often end up doing the opposite. Why? While this is a much bigger topic, the short answer is that our emotions take over and we lose sight of the big picture. This is especially relevant when our short-term livelihood is at stake and/or large life events (weddings, babies, new job, etc.) are involved.
Often missed, but extremely important, is the spiritual side. This is the part which brings everything together. It provides the greater direction for our decisions and gives a sense of meaning. It’s how we think about the legacy we want to leave and how we identify the things most important to us. It’s the piece that uncovers what we truly value.
How we, as individuals, relate to The Four Quadrants of Money is what drives our financial decisions. The complexities that lie within each part make up who we are and how we live. Even though there are no right or wrong answers or one-size-fits-all solutions, we have found this tool to be universally helpful in defining, and planning for, the priorities our clients value the most.