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If traditional budgeting leaves you feeling like you’re always subtracting things from your life, you may want to try a values based budget.
We all need a spending plan, but if personal finance is really personal, then it should help you to do the most important things in your life.
Values based budgeting could be your answer to managing your take-home pay while still living a fulfilled life.
It’s a great tool that can help you to find the highest value spending priorities for both your money and your time.
A Values Based budget is a budgeting method that takes your core values into consideration when you’re coming up with a spending plan.
A traditional budget helps you to spend less than you make, but it doesn’t help you to decide how to divide up your take-home pay.
Personal finance doesn’t need to be complicated, but it does need to be personal. So a budget based on your own values first helps you to define your strongest core beliefs, then guides you to come up with a spending plan that aligns with them.
Your sister may spend $75 a week on restaurants or take out. Your neighbor seems to do a new home improvement every month. But letting your spending habits be influenced by those around you is dangerous.
Having no personal criteria for spending priorities is one way to fall into debt. And it can leave you wondering why you work and earn money if you can never do the things that fire you up.
What’s the Advantage of a Values Based Budget?
Money is a tool that helps you to live the life you want, but there’s only so much of it. A big frustration with budgeting is that there’s never enough money to pay for all your needs and wants.
A values based budget helps you to define your core values, and translate them into spending priorities that’ll help you to feel like your take-home pay isn’t just slipping through your fingers.
Now, rather than just crunching numbers, your values based budget has a why behind it.
Simon Sinek talked about this concept in one of the most popular Ted Talks ever, where he said, “people don’t truly buy into an idea until they understand the WHY behind it”.
A Values Based Budget helps you to live your best life now
We’re inundated with options and as a result, we as a society have a problem with debt. The average American credit card holder has a balance of over $6200!
So unless you have some kind of strategy to prioritize spending, debt can drag on for decades. And the things you want to do in life are pushed to the back burner while you pay bills.
You and I might be close friends, but maybe I value traveling and experiencing other cultures so I budget money each week to fund my adventures. And maybe you have children involved with sports, so you’re passionate about providing the money and time for them to grow and develop.
Your core values will evolve at different stages of life, and with it, your spending plan. But over the long run, budgeting based on your values helps you to manage money closely, and still feel like you’re living a fulfilled life.
How to Create a Values Based Budget
Budgeting just for the sake of saving money might be smart, but it’s not necessarily gonna help you feel like you’re living your best life.
Here are three steps that’ll help you to total your current monthly expenses, then define your list of values, and finally adjust your spending priorities to help you to live a more fulfilled life.
1. Document your spending now
First determine where your money is going now. Don’t worry about adjusting anything yet. You just want an accurate picture of where your paycheck is going each month.
Feel free to download one of these free budget templates.
Just examine your bank statements over the past three months, categorizing and totaling each area where you’re spending money.
2. Determine your values
Your core values are your most basic beliefs about who you are, and what you stand for.
Defining them, writing them down and reviewing them once in a while can help you to be sure you’re living like the type of person you claim to be.
For instance, my daughter has been thinking a lot lately about a career path. She messaged yesterday, that her and some friends signed up for a trash pickup in a park. As she described it to me she wrote, “service is one thing I’m certain that I love”.
So for her, service to others is a core value.
After you’ve put some thought into defining your own core values, you’ll probably recognize that you’re spending money and time on things that aren’t aligned with what you consider most important in life.
And when it comes down to your overall satisfaction in life, how you spend your money and your time is a big factor.
Here’s a list of 50 core values from James Clear’s site that can help you decide what’s most important to you. He suggests picking no more than about five core values.
As you go through the list, it may help to keep these questions in mind:
- When you feel most satisfied, what are you doing? Where are you?
- What kind of events or situations really annoy you?
- Have you ever had a turning point in your life? An aha moment? What precipitated it?
- Is there someone you particularly admire? Why?
- Have you had a relationship that didn’t work out? What was missing?
- Have you worked in a job that was particularly satisfying (or not)? What made it that way?
Once you create your own list of values, step three will help you to translate that into spending priorities.
3. Adjust your budget to align with your values
Once you’ve got a good handle on what you truly value in life, it’s time to see if your spending priorities align with what’s most important to you.
As you compare your spending habits to your core values, you may also see that the way you spend your time isn’t serving you well.
For instance, maybe you value autonomy and freedom in your life, and you’ve always dreamed of starting your own business. But much of your free time is spent working on your house. Maybe owning a fixer-upper isn’t the best choice at this stage.
Or maybe you value security, but you’re struggling with debt. You can’t make more than minimum payments, but your social life revolves around restaurant meals, clubs and weekend getaways.
Robert Kiyosaki, the author of Rich Dad, Poor Dad said, “The only difference between a rich person and a poor person, is how they use their time”.
Where do you spend a lot of time that might not align with your core values?
- A long commute
- In a job you don’t like
- Committed to too many obligations
- Lots of TV or social media…
As you examine how you spend your take-home pay, consider whether each regular expense contributes to, or detracts from your ability to do the things you value most.
For instance, when I did this, I concluded that one of my values was adventure. I enjoy getting away from the normal routine once in a while and going somewhere new. Nothing extravagant, usually hiking, skiing or some other budget-minded destination.
I found the money to do this by reducing other expenses like a $900 a month grocery bill, finding an alternative to cable TV, finding cheaper insurance policies, and refinancing our home loan to a cheaper rate.
- What do you value, both long-term and in your daily life?
- How can you adjust your spending habits to help steer you in that direction?
It doesn’t need to be a drastic change. As James Clear said in his book, Atomic Habits,
“What’s important is not where you are now. It’s whether you’re on a path of improvement or decline.”
What can make a values based budget difficult?
Here are three scenarios that could make establishing your values based budget difficult, but not impossible if you recognize them.
1. Allowing money filters to influence your spending
It’s common to view money through the lens of your upbringing.
If your family lived paycheck to paycheck, maybe you see money as a scarce resource. You’re uber focused on paying the bills and saving every dime. Investing in a course or training may be a luxury you’re not willing to spend money on.
Or maybe your parents were free-spenders and your home was filled with the latest gadgets and name-brand clothes. So you may have inherited the mindset that life is about acquiring stuff and living for today.
A values based budget will help you to look beyond your filters and help you to drill down to what you value. Not your parents, your friends or your neighbors. And then to adjust your target spending amounts to match the most important things in your life.
2. Remaining stuck in debt
If you’re struggling with debt to a point where there’s nothing left after paying the bills, it may seem pointless to start defining your values.
But one reason you’re struggling could be because you haven’t identified what you truly value, and as a result, you’re reaching in too many directions.
Whatever your money situation is now, prioritizing your values is a useful exercise. You don’t need to make a dramatic improvement within a month or two. Each small adjustment in your spending habits, combined, can bring a dramatic improvement over time.
3. Partners with different spending habits
If you’re a saver but your partner prefers to spend now, pay later, it can make for some difficult dinner conversations – not to mention never really having a cohesive money strategy.
It might be easier to find common ground on your personal values before discussing dollars and cents. Try to agree first on some core values, and from there, on some longer-term goals. If you can get there, then it might be easier to compromise on short-term spending.
Is a Values Based Budget for You?
One of the most expressed regrets near the end of life is that we didn’t get to do the things we wanted to. We envisioned a certain way of life, but it never panned out.
Maybe we stayed in the wrong job for two decades, or in a toxic relationship. Or somehow debt became such a part of life that there was never enough money to do anything.
And then time ran out.
We already know that budgeting your money is the only way to be sure you’re building security.
And though money can’t buy you love, it can buy you the opportunity to get involved with the things you love to do.
But only if you first define those things, and then adjust your spending priorities to make them possible.
The writer, G. K. Chesterton once said, “Show me your checkbook and calendar, and I’ll tell you what your values are.”
Money and time might be the two most impactful resources you have to live the life you want.
- So if the things you love to do always seem to be out of reach…
- If you feel trapped in paycheck to paycheck life with no real strategy to move ahead…
- And If budgeting seems like a chore you always want to put off until the last minute…
You might want to try creating a values based budget.