Values-based budgeting explained: how it could help you track your spending
by Verve Super
If you’ve found yourself wondering where your money is going, then a values-based budget could be useful.
Usually, when we talk about money and budgeting, it’s about saving for the big-ticket items: a car, a house, the holiday we’ve lusted over for years. But if you’re looking to shake up how you approach budgeting and bring about more meaning to managing your money, ‘values-based’ budgeting could be just the thing.
The savings strategy has played a pivotal role in this generation’s proactive money revolution. Although the process is relatively straightforward, it does require self-reflection and it can bring to the surface other questions about what we truly value in life. It’s worth bearing this in mind as you read on. And even if a values-based budget doesn’t work for you now, it may be something you revisit in the future.
What is values-based budgeting?
In essence: values-based budgeting is about spending money on the things you value most in life. Rather than focusing on what to cut out, it’s about creating a spending plan that helps you to feel good about the things you are buying, and what you’re saving for.
Let’s pause for some clarity. It’s important to acknowledge the role privilege plays in being in a position to create a values-based budget. It relies on having some expendable income and having available cash after covering your necessary expenses.
If you are in a position to spend money on consumer goods and want to do it more ‘wisely’, then it’s worth reading on!
Who rates values-based budgeting?
If you found this article by googling the term ‘values-based budgeting’, you may have also found results for calculating your ‘life energy’ figure. This is another term experts use when talking about values-based budgeting. Among those top money people are authors of ‘Your Money or Your Life’ Vicki Robin and Joe Dominguez, who go into depth about ‘calculating life energy’ in their best-selling book.
But if you’re just getting started, it’s worth understanding the basics of how and why you might want to align your dollars with your values.
A simple way to think about it is to imagine your employer offered to pay you in something other than dollars. What would that ‘something else’ be?
It might be travel vouchers, a new car, or designer handbags. Whatever it is, thinking about it will help you understand what things you value more than others. If you come to realise that you would much rather receive plane tickets over takeaway food, then you can apply the same thinking to how you spend your dollars in real life.
How to define your values
If you’re an avid Brené Brown fan, you might already be familiar with what values are, how to define them and why they’re so important. Here is a quick recap — a value is a way of being or believing that you, personally, consider important.
In her book ‘Dare to Lead’, Brené focuses on the importance of leaders maintaining a strong awareness of their values. Even if you do not consider yourself a ‘leader’ in other aspects of life, when it comes to money we are all leaders of our financial destiny. Brené argues that to be effective leaders we need to ensure our values align with our behaviours. At Verve, we’d suggest the same goes for your money – to be the best leader of your financial life, it starts by aligning your financial behaviours with your values.
Defining your core values is an act of self-awareness and reflection, so where do you begin?. Starting with Brené’s list of approximately one hundred values, start to focus on the words that resonate with you most. These are words that you feel define what is most important to you. Narrow your list down to ten. There you have it, these are your top ten core values.
Here is an example of a core value list:
- Giving back
How to practice values-based budgeting
To start practicing values-based budgeting, align each item of your budget with at least one of your values. For example, using the list of values above, ‘eating out’ as a budget item might correspond with the value ‘fun’. If you already have a budget, or actively track your spending, it could be as simple as adding a values column to your spreadsheet to clearly identify which line item aligns with which value.
This practice can bring awareness to your financial priorities. Some values might be entirely forgotten when it comes to how you allocate your money and others might be taking up the lion’s share of your budget. The important point to remember is that practicing values-based budgeting is about bringing your values firmly into your financial decision-making.
Remember, it’s personal
Values-based budgeting is as personal as it gets in money terms! What you’re happy spending money on, may be entirely different to someone else. If you’re in a relationship or share financial responsibilities with other people, it’s helpful to get a clear understanding of your individual values and how they can all be equally catered for. It might mean compromising or having important money conversations.
Values-based budgeting isn’t a strategy to help you save six figures and retire early. Rather it’s about being happier with how you save and spend the money you do have, knowing you’re cultivating a life that matters to you.
For more on money management, you can skip to Step 2 of our Money & Mindset course.
A friendly reminder that all the financial information contained in this blog is general and doesn’t take into account your personal financial objectives, situation, or needs. It’s important to do your own research and consider getting in touch with a professional adviser to access specific advice tailored to your unique situation. When considering if Verve Super is appropriate for you, please read the PDS available on our website.