Values-based spending is a money management approach that ensures your money decisions are aligned with your values. Basically, all of your spendings is based on what is important to you.
What does values-based spending look like?
The short answer is that all of your spendings is on what is truly important to you. There is nothing on your list of expenses that you regret spending money on. Everything is a decision made based on your values and is spent on something you enjoy.
Values-based spending is reallocating your money in your budget to areas that are more important to you.
Years ago, my budget included about $50 per month at the nail salon/spa. In the beginning, I really enjoyed it. However, after a few months, it started to feel like another chore. It was something I put on my list and squeezed into my day. Here I was spending $50 per month on something that was not really enjoyable to me anymore. That is not values-based spending.
I eventually stopped going to the nail salon monthly. Instead, I go a few times per year and I really make it a treat. Spending a little more money to get a more relaxing experience but going less often is much more fun for me. and by doing this, I am spending $250 per year instead of the $600 I was spending when I went monthly. Not only do I feel much more relaxed and happy after the treatments, but I can also allocate the remaining $350 per year (about $30 per month) to something else I enjoy more. This is values-based spending.
The benefits of values-based spending
Besides spending money on what you enjoy, what are the benefits of values-based spending?
1. Opportunity to define your values
Using this approach to spending will require that you are aware of your values. If you are not sure what your values are this is a great opportunity to do some inner work and define them. Not only will this help with your spending and budgets but it will help you with other life decisions. So, whether or not you choose this method for your finances, I suggest spending some time discovering your values.
2. Values-based spending takes the sting out of the budget
You may be amazed at how much you spend on items or services that really are not that important to you. By focusing on what makes you feel good you will gain some positive momentum and eventually realize that the areas you are no longer spending money on frees up your money for things you enjoy more. Therefore, your budget will no longer feel restricting. Instead, it becomes a map of how to get to where you want to go.
3. You can reach your financial goals quicker
As long as your goals are lined up with your values, the values-based spending approach helps you reach your goals more quickly. Because your values and goals are in alignment when you take on this approach you are continually making decisions that lead you closer to achieving your goals and eventually bring your visions to fruition. And, the bonus is that you have a good time along the way, enjoying your adventure.
Let’s get started with values-based spending
Does the values-based spending approach sound ideal for you but you are not sure where to start? Below are three steps I suggest.
1. List your values
First you need to list your values. Otherwise, you will not be in a position to make the best decisions for you. If you do not already know what your values are then do some inner reflection to determine exactly what is important to you.
Unlike your core values, your values when it comes to spending may change more often. For example, my values now that my children are in their teen years and I am heading into another chapter of my life are very different than my values when I did not have any children. My core values are relatively the same.
Take some time and determine both your core values and the values you currently have for your current stage in your life.
My core values are family, security, love, self-worth, integrity, and calmness. As you can see, it would be difficult to make spending decisions based on these alone because they are quite macro. Therefore, define more specific values in order to get the most out of this process.
My more specific values include having a comfortable home, family bonding, financial security, health, relationships and self-care.
Take some time and think about what is important to you. Write it down somewhere so that you can refer to it when creating your budget or making a financial decision.
2. Check out your current spending
Now that you have your list of values gather all of your spending reports for the past 1-2 months. If you are using credit, ATM cards, or a bill pay service with your bank you can obtain this information from your statements. If you use cash then do the best you can with receipts or what you can remember. For me, cash is difficult because it is easy to forget how much I spent on the little things. And, the little things add up which is why I give myself a cash allowance to spend on whatever I want and I do not track it. I only note it as cash spending of $320 per month.
Once you have your spending history listed note which items support your values. Be honest with yourself. Is there a lot of dining out and is this really a value of yours? If you are foody and you get a lot of pleasure exploring various cuisines then maybe it is a value for you and in that case, it is a good place to continue spending your money. On the other hand, if you are going out to fast food quite a bit and one of your values is health you may want to reconsider if this spending is in line with your values.
Balancing your values
Be aware when you are trading one value for another. Let’s say spending time with friends is a value of yours and you really enjoy being with them. Each week you go to a bar and order drinks and food and although you had fun, you do not feel well the next day. Although you are spending time with friends which is one value, you are giving up your value of health. One solution may be to continue going to the bar each week and limiting what you eat and drink. Maybe you can eat something beforehand so you are not so hungry. This way, you are still spending time with friends while not giving in to your health value. Another suggestion is to go to the bar every other week and on the opposite weeks suggest a different venue. Who knows, maybe the alternative will be better for everyone.
Going through this exercise leads you to see where your money is going, evaluate if it lines up with your values, and gives you the opportunity to creatively make some changes.
3. Monitor it
Yup, monitor your spending. There is no other way to make sure you are staying balanced during your journey. Check-in on your spending every month and note what was in line with your values. For things that were not, ask yourself if you enjoyed them. By monitoring yourself, you are also checking in on your values Maybe they are not as strong as you thought. There can be a hierarchy for values.
For example, health is a value of mine but when I check out my spending I see dining out and drinking weekly. So, does that mean that I am spending money on something that is not a valued? That depends on how far up the scale health is for me and if that spending supported another value. Me, I enjoy dining out and having a few drinks here and there with my husband as a time to connect without the kids. This is a value of mine that is currently very important and because I do other things that support my health value it is not necessary for me to remove this expense. However, we could alter it.
We were spending quite a bit weekly for this so we decided that we would dine out every other week and on the opposite weeks we would make dinner at home together while the kids were at their gymnastics class (they are there a few hours). This works great. We spend a little less money, we still have time together and we learn some new healthier recipes. Even better, we appreciate the dining out time a little more when we go. This is an example of how monitoring helps you to find creative ways to adjust your spending to be more in line with your values.
In summary
Hopefully, you have a good idea of what values-based spending is and how you can start implementing it. Once you start it is a really easy way to the budget given that you are always working toward your goals. Likewise, it is much easier to say no to spending that does not support what you want. Your mindset will naturally shift.
Thanks for reading!
Stay Balanced,
Thanks for reading!
Jill