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Values Based Budgeting
Sounds complicated but using values based budgeting can simplify the process with which you create a household budget. Let’s dive in!
That Was Easy!
Do you remember those buttons they used to sell at Staples – the big red ones that said EASY in bold letters across the top – you’d click it an it would say “that was easy”?
What if I told you that the EASY button of living the life of your dreams comes disguised as a budget… but not just any budget… a values based budget.
Values based budgeting or values based spending is a budget strategy wherein you spend money in the areas that matter most – the areas that you value – first and foremost.
Let me pose this question to you… if your employer paid you in something other than money… what would you want to be paid in? In fancy dinners? Plane tickets? Massages? Days off? The newest shiniest iPhone? Fully funded college tuition for your kids?
Obviously yes, you do need to pay for rent, housing, transportation, food and clothing, but above and beyond those lame, necessary expenses, what would you want to be paid in if it wasn’t dollars?
Why You’ll Love Values Based Budgeting:
The great part about using a values based approach to budgeting is that you are living in alignment with what matters most to you – YES! The peace that comes from that alignment is second-to-none.
The hard part about this values based approach to budgeting and spending… is that it requires you to get clear on your values first… That means you have to press pause on the running running hustle hustle busy busy of your everyday life and sit. And think. And talk to your partner. And think. And life your life. And think. And sit with and discover what truly matters most to you in this life.
It can be helpful, as you are looking forward and making your values based budget for this coming month – to also take a moment to look backwards. Audit your bank account, credit card statement and Venmo history for the last 3 months. What makes you smile when you see it as an expenditure? What surprises you? What disappoints you? What brought you joy? What do you want to do more of? What do you want to see less money going out the door for?
The fun part about values based budgeting is that instead of doing a budget because i said so, you read an article or your mom and dad have a budget… is that when you base your budget on your values then the budget becomes a tool to use to squeeze the most out of life. It’s a way to send the most money to the things that bring you joy, matter most and spend less money on things that you don’t care about as much.
Why Values Based Budgeting Rocks:
- It’s personalized, REALLY personalized to you!
You aren’t following some arbitrary rule like “save 15% of your income” or the 50/30/20 rule where people recommend that you life on 50% of your income, use 30% for wants and save the last 20%. That’s like saying that every woman in america should wear the exact same pair of jeans, regardless of how tall she is, what her waist, thigh dimensions, inseam is and her preferred style of jeans – NO ONE would have jeans that fit. Trying to fit your unique income, lifestyle, loves, joys, passions and spending habits into that pre-cut mold is going to leave you wanting because you aren’t focusing on those things that are most important to you!
- You don’t have to wait to live the life of your dreams.
If you dream of travel, or fancy clothing, or buying a house – you can start taking steps to build these things into your budget this month or this year.
It doesn’t mean that delayed gratification goes away altogether and yes, you still need to live within your means… but if TRAVEL is one of your core values… then don’t wait to retire to travel. Start building small driving trips into your calendar and your budget this month. Choose a trip that you want to take this year, get a quote on airfare and housing and excursions and start including that in your budget. It makes your dreams come alive and become a reality THIS MONTH by working them into your budget NOW, not at age 65!
- Tamps down that impulse to… well, to impulse.
You are already funding the categories that you love, want to splurge on and would be likely to blow to budget on anyway. Just like Allie shared in Episode 52 about her journey to debt freedom – restrictive budgets are like restrictive diets in that psychologically by restricting ourselves, we are setting ourselves up to binge later.
How to Build a Values Based Budget:
Here are the 6 steps to follow to create your ideal, unique to you, super-duper personalized budget that’s going to help you spend money on all the things you love and less money on things that you don’t value so much:
1 – Figure out what matters most
This is both the hardest and the most important step in Values Based Budgeting. It’s sitting down and having the conversations and doing the work to figure out what’s most important to you as an individual and to you and your partner if you live inside a partnership.
Think again about that question – if your employer paid you in something other than money – what would you want to get paid in? Write it down. If it’s more than one thing, categorize them from most desirable on down.
If you don’t automatically know what matters most to you, if you don’t have a list of your core values, head on back this post where I walk you through a three step process to define those values. If you are a visual learner, head to https://www.tracybingaman.com/values to download a free guide that’s going to walk you through a series of steps, exercises and prompts to get clear and personal on what matters most to you.
2 – Audit your spending
Yes, this means looking in detail at your credit card statement or your monthly statement from the bank. You can either look back at 1-3 months of statements or go forward tracking your spending. My preference is that you look back – because that’s a relatively unbiased look at your actual, unbridled spending. If you track going forward you may be tempted to curtail and edit your purchases and you might not get as accurate of a view. Look back or track going forward – either way I want you to get an idea about what you’re spending where and on what items or experiences.
It sounds like examining what you’ve been spending and holding that spending up against your newly minted or rediscovered core values and seeing where you are in alignment or out of alignment. Are you truly spending money on things, experiences and items that matter most to you? Is this reflected in how you are choosing to spend your time, also?
3 – Take time to figure out what you don’t value
These might be things that are trending, popular, and that many of your friends or the people that you follow on social media have, consume, buy and share about. What are things that you just simply don’t care about?
This seems like a strange step but it’s so important to identify the areas in your budget that you can freely cut back on, decrease, and not feel a pinch emotionally because they don’t matter to you anyway!
4 – Take a look at your basics – costs of living – fixed expenses – recurring bills and subscriptions
Here you are looking for opportunities to trim down or decrease these basic costs, your necessities, to create more wiggle room for the categories that fill you up and are in alignment with your core values.
5 – Now look at your “extras” – things like eating out, clothing, etc.
Here you are thinking about whether these extras are in alignment with both your values and your financial goals. Are there areas that you can (and are willing to, because they aren’t your core value categories) cut back on to make more room for the things you love?
Do you sense a pattern here? We are intentionally trimming and tightening up the less fun categories and the categories that you don’t care so much about to allocate more dollars towards the things you value the most… which brings me to step 6…
6 – Use that “found” money trimmed from essentials and extras – and add it to the core values categories
This is the most fun step. You did the work. You figured out what matters most to you and your family. You created margin in your budget and now you get to enjoy it. That peace that comes from spending in alignment with your budget which is in line with your values. Muah. It’s the perfect combination!
Want to learn more about feeling inspired to budget and change your mindset? Check out this post featuring Allison Baggerly where she shares her BEST money, mindset and budgeting tips.