Values-Based Spending
What is values-based spending? How does it work?
What if every penny you earned was assigned a very specific job? What if this job was to only pay for what you value and enjoy? Would you feel better about your money? Would you feel like your money is working for you instead of the reverse? This is the idea behind values-based spending and guess what? It works like a dream. This spin on budgeting is all about spending more money on the things that make your life feel joyful and meaningful, and spending less on things that are meaningless to you and provide no value to your life.
The first step to introducing values-based spending requires an investigation . When was the last time you REALLY looked at how you spent your money? I know. That’s a horrible question to ask you. Who has time for that? But, seriously. When was the last time you asked yourself, “Why can’t I save money? Where does it all go?”. If this resonates with you, it’s time to set your money values. I promise this is an exercise that feels really good when you are done. Kind of like a gentle yoga class or a nice bubble bath (yes, an exaggeration, but it does feel good).
The first thing you want to do is look at how you spent your money in the last six months. Group your spending into three different categories:
1). Mandatory expenses.
2). Discretionary spending.
3). Saving/investing in my future.
From here, a good guideline to know is the 50/30/20 budgeting rule which suggests no more than 50% of your income be spent on mandatory expenses, no more than 30% on discretionary, and at least 20% be put away in savings. How close are you? Is too much money getting sucked up by discretionary spending and:
Subscriptions you don’t use?
Expensive entertainment when you could be having fun for free?
Maintaining a certain image?
Doing things you “should” do, but bring no joy or value?
Accumulating stuff that you really don’t need?
If so, your spending is not aligned with your values. Here’s how we get alignment. Do me a favor and take out a piece of paper and a pen. Write down your answers to the following questions. Take your time and really think about your answers. Make sure they feel real and true to you.
What brings me true joy?
What makes me feel confident?
Who are the people in my life who bring me joy and make me feel good?
What activities do I love? Which ones are free?
Do I have any “bucket list” items I want to accomplish this year?
What do I want to learn?
Where do I want to travel?
What is something new I want to try?
How do I want to give back?
What does my ideal life look like this year? In 5 years? In 10 years?
What is standing in my way? How can I remove or change the obstacles?
Now you have your categories for values-based spending. Your answers to these questions are your money values. How can you fund these categories? Do you need to grow income in order to fund them? Do you also need to pull back on expenses that don’t align with your values? Determine where you can shift spending and assign timelines and a dollar amount to your values-based spending categories. Congratulations you have just introduced values-based spending practices into your personal finance journey. Let me know how it goes. I’d love to hear from you at Talking Money Tuesdays. Just check out my events by clicking here.