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One reason why I think life is harder than it needs to be is that we're missing one key ingredient: Virtues. While there are several virtues you can practice, these money virtues can help you handle your money more responsibly.
And you know what that means?
A more positive outlook on life and the world.
What is a Virtue?
While I'm going to be listing different money virtues, let's refresh on what's a virtue.
The hefty Oxford Dictionary defines virtue as “a quality considered morally good or desirable in a person.”
In other words, treat people the way you want to be treated day in and day out. There are virtues for many different topics but all virtues tend to have their roots in Plato's four cardinal virtues:
- Prudence– Thinking ahead to avoid future mistakes.
- Justice– Being fair to all people, not showing favoritism.
- Temperance- Not being excessive. Only having what you need, nothing more and nothing less.
- Courage- Doing what's right even it's more difficult to do it the easy way.
The money virtues below all resonate at least one of the virtues listed above.
How can we put the four cardinal virtues to work when it comes to our money?
Let's take a look. Count to see how many I've come up with that you already do.
Cardinal Virtue: Justice
My wife and I give to several charities each month that help people on the local, national, and international level. We've been the recipient of other's help over the year and we enjoy being able to return the favor.
Studies show that charitable giving makes donor happier people.
I've also seen reports that people who donate to charity regularly are less likely to struggle with money. This is partially because you set aside money for others first each month. Since you don't want to miss your monthly contribution, (so the theory goes) you clean up your non-charity spending to know that you can make a donation and still pay your bills and save money for the future.
If you're looking for a new charity to give to, use Charity Navigator to pick ones with high ratings. These charities put most of your money to helping people instead of paying executive salaries and other frivolous expenses.
Save for the Large, Future Expenses
Cardinal Virtue: Prudence
I'll be honest, probably the first time I heard the word prudence was my second year in college. I think it's when we were studying the Federalist Papers that America's Founding Fathers wrote. Regardless, I've had a strange admiration for that word ever since.
How is it prudent to save for the future?
We all know that we're going to face large expenses that we can't afford to pay with our regular monthly paycheck. Your two options are to either (a) go in debt or (b) pull from savings and avoid debt.
Here are some expenses you should tuck your spare change away for each month:
If you need more reasons, read my Importance of an Emergency Fund article.
Invest According To Your Age
Cardinal Virtue: Temperance and Prudence
There are many different ways you can invest and earn passive income. For the last 100ish years, the stock market has been the #1 investing option for the Average Joe or Jane.
While you should invest and take some risk to earn potentially higher returns, you shouldn't speculate and risk everything. You need to diversify, use proper position sizing, and invest in quality companies. This is one reason why I use investing newsletters to pick individual stocks.
At the same time, you need to reduce your exposure to risk as you near retirement age when you can't afford to lose money. As you age, it's more acceptable to keep your nest egg in an interest-bearing bank account and other fixed income vehicles.
One of my favorite New Testament parables to drive this point home is the Parable of the Talents. Read it and explore ways you can grow your wealth. Without harming others, of course.
Be Happy With What You Own
Cardinal Virtue: Temperance
Living a virtuous life doesn't mean you have to give all your money to the poor and assume a life of poverty. But you don't have to “keep up with the Joneses” or always own the latest and greatest items to remain in the cool club. Guess what, high school peer pressure ends at high school and if you need to keep spending money you don't have to maintain a social status, it's not worth it.
Being content with what you have can be difficult. But trust me, not having monthly payments is awesome.
Some ways we avoid monthly payments include:
- Still using an iPhone 5S
- Buying used cars on Craigslist
- Cooking meals at home instead of going out to eat (these small purchases can compound credit card debt)
- Buying a house smaller than we wanted and what the bank said we could afford
- Take vacations when we can pay for the lodging and transit costs at booking time
Question: Don't think you can be happy with what you have? See how our family of four thrives on $35,000.
Virtue: Justice and Prudence
Hard work can get you far in life. While the easy way is to assume the rely on the charity of others and maintain the status quo. Instead, challenge yourself to do better. We all have hard times and can use the help. But, the Protestant work ethic is still alive and well.
My wife and I work hard to continue advancing our careers and to provide opportunities for our children to get a head start on being successful working adults.
If you need some extra motivation, consider watching Generation: Freedom.
After awhile, you might not get the help you need from others. Be it private charitable organizations or the government, you must play by their rules to continue receiving aid. In some cases, they might not be able to help you and then you have to fend for yourself to make ends meet. Being proactive and trying to build your own firm footing as soon as possible can help prevent life's unexpected surprises.
Putting Your Money Where Your Mouth Is
Cardinal Virtue: Courage
This money virtue can definitely be tricky at times. Ask almost any politician who has broken a campaign promise.
You can pursue this virtue in many different ways. For instance, you might not buy certain brands that support a social mission you don't agree with. Take Nike as an example for being the poster child of sweat factories and hiring controversial brand ambassadors.
It can also mean canceling certain subscriptions because you don't agree with the social causes they support.
When it comes to investing, you might follow social conscious investing that avoids companies that don't sell vice products like tobacco and alcohol. Or, one of the many other social screens you can use to only invest in stocks that agree with your social values.
When you need help spending less, earning more, or even finding more purpose to life, money virtues are one starting point. Challenge yourself to do better. Not just once, but habitually. That's living the virtuous life.
Josh founded Money Buffalo in 2015 to help people get out of debt and make smart financial decisions. He is currently a full-time personal finance writer with work featured in Forbes Advisor, Fox Business, and Credible.