Managing Money Make Room for What Matters with Values-Based Budgeting

by Kara Stevens | June 22, 2020

The start of a new season is good a time for kicking off new commitments in the spirit of betterment.

Which makes it an ideal moment to consider pressing reset on your finances. When you cultivate, implement and refine meaningful and sustainable money practices, you not only improve your finances, but the confidence you build can lead to transformation in other areas of your life.

To achieve this new level of financial wellness, I suggest incorporating values-based budgeting into your current money practice. How? First, reflect on your values — the beliefs and principles that drive behaviors and attitudes — to determine your life and financial goals. A values-based budget is, then, a personal saving and spending plan aligned to what matters to you the most.

It’s basically an extension of you. And, like you, values are dynamic; they expand as we evolve and grow more self-aware. A values-based budget leaves room for you — and your finances — to grow over time.

How my values have influenced my budgeting

What you prioritize in one stage in life may shift during another phase. For example, in my 20s, I valued independence and adventure, so I focused my energy and money on budget-friendly solo travel. I spent time in Costa Rica, the Dominican Republic, Haiti, Ghana, India and elsewhere, soaking up culture and languages. I lived in hostels, one-room apartments and homestays, and worked as an English as a Second Language (ESL) teacher to afford this globe-trotting lifestyle.

It was exciting and fulfilling, but when my 30s rolled around, adventure took a backseat to security. I entered the workforce and I hustled hard. I also took gigs outside of my full-time positions as a teacher and later a school administrator to pay off massive student loan debt, build an emergency fund and maximize my retirement contributions.

Now in my 40s — and a mother, wife and entrepreneur — I’ve determined that flexibility, self-care and rock-solid relationships are a must. Rather than save up for my next exotic getaway or onboard a new client just for the sake of money, my budget tells a different story. It’s one of a woman who faithfully pays down a mortgage on a home that doubles as her business headquarters, annually renews a family membership at a local gym, splurges on facials, and makes the most of cheap eats and off-Broadway plays found right in her home city, enjoyed with her husband and girlfriends.

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What you prioritize in one stage in life may shift during another phase.
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Start with your ‘why’

What’s important to you at this stage in life? And how can you make sure that your budget lines up to best support those goals? Sticking to a values-based budget can become second nature once you’re clear about what you want out of life. The subsequent purchases and experiences will all work in service of your vision.

But nailing down your values can be a challenge on the first try, especially if you’ve never contemplated what brings meaning and joy to your life, let alone your finances.

If you struggle with identifying your values, try this exercise: Visualize your ideal day. Paint the picture of the type of work you do, your preferred work culture, where you’re living, your support network, your hobbies and how you engage in self-care.

An app like Clasp can help you make sense of how you feel about money, your emotional triggers, and your most influential financial role models — all necessary pre-work to help you think more critically about how to match your money with your values.

Reevaluate your costs

Once you home in on your core values, you’ll be able to reevaluate your fixed and variables costs with a new, more precise lens.

You may realize, for instance, that you could save a couple hundred dollars of your take-home pay every month on a need like housing because you don’t care about living in a designer zip code. Or you may opt to sell your car and take public transportation if you live in a transit-friendly city and value eco-friendly living. It may even dawn on you that you could trim the fat on your grocery bill without sacrificing your need for quality cuts, produce, or ingredients if you decide to shop by menu, with a list, or on a weekly basis to avoid food waste, duplicate purchases or impulse buys.

With this approach, you could use any freed-up money to create other values-based short-term and long-term saving and spending goals such as a rainy-day fund, investing, quarterly travel, paying for a personal chef or a cleaning service.

Similarly, you may notice that variable or mutable costs like monthly magazine subscriptions, streaming services, unused data plans or eating out are wasting money. Instead, earmark those funds to enroll in personal development classes, host monthly dinner parties, build a website around your freelance services or dip your toe into the world of investing. Once you define goals and values, your budget can shift to support those things.

Young woman at cafe using laptop

End with your ‘how’

Now that you’ve figured out why you want to adjust your spending and savings, find the right resource or guide to help you stick with it.

Tools like an old-school spreadsheet and the latest budget app play important supporting roles in building an authentic, values-based relationship with your money. They provide the “how” — the system or structure — for tracking expenses, staying organized and keeping yourself accountable across months and years.

But doing the opposite — focusing on the how before the why — essentially treats the acts of saving and spending as isolated and transactional moves rather than the relational and contextual ones that they are.

Help, I’m fancy and so are my values!

Values-based budgets can serve as a key structure in any comprehensive financial wellness plan. Practiced responsibly, values-based saving and spending can spare you feelings of shame, confusion and anxiety that might otherwise emerge at the end of the month when you discover you have little in the way of savings or memorable purchases to show for your earnings.

Regrettably, in inexperienced hands, there’s also a chance that values-based budgeting can lead to poor money management in the name of living your most aligned life. You may justify the purchase of a pricey retreat with credit because you’re focused on self-improvement or take out a personal loan in order to buy high-end music equipment because you want to explore your creative side.

To safeguard against this common misstep, be willing to:

  1. Sink it. Companies often establish and gradually build up so-called sinking funds to cover the cost of issuing bonds. You can create your own version to help pay for big ticket, values-based purchases: Every month sock away money into a savings account until you can pay for the desired item or experience in full. Or set a budget first and then research a values-based item that comfortably can be purchased within this financial guideline.

     

  2. Shift it. To make room in your budget for what matters to you the most, you may have to cut or pull funds from other budget categories so you can comfortably afford this priority item or experience and not compromise your overall goal of financial wellness.

     

  3. Make more. Enter the gig economy or work overtime to bring in an additional stream of income to offset the gaps between how much you earn and how much you need each month.

     

  4. Rank your values. Your budget doesn’t have to address every single value for it to be an authentic spending and saving plan. Design your budget around your high-leverage values first and then figure out how to attend to others over time, perhaps quarterly or even bi-annually.
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Your budget doesn’t have to address every single value for it to be an authentic spending and saving plan.
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In 10 years, I’ll be 50 years old. If my 50s promise to be anything like the last two decades, I’ll have new goals and values. And along the way, I’ll have a budget that allows me to embrace and experience it all.

Budgeting Balance
Kara Stevens

is the New York City-based founder of The Frugal Feminista, author of heal your relationship with money, and creator of The 60 Days to Slay Sallie Mae course.

The content reflects the view of the author of the article and does not necessarily reflect the views of Citi or its employees, and we do not guarantee the accuracy or completeness of the information presented in the article.