Values Based Budget

What the Heck is a Values Based Budget…and Why Should You Use One?

One of the best and worst parts about being a coach is that sometimes the things I teach my clients are lessons that I need a refresher on too. I found myself in this situation last week. I was talking a few clients through the basics of values based budgeting as we dove into setting up their personal money management systems. And on my own time, I was struggling with a purchase I wanted to make.  So, before I tell you what the heck a values based budget is…and why you should use one…I’m going to tell you a little story.

I’m not sure I would truly classify myself as a runner. But I run…three to four times a week. And for the most part, I enjoy it. For me though, there is no running without music. Right now, I use a headphone/Mp3 player combo that I picked up on Amazon a few years ago. It works well. There’s just one small problem. I’m completely deaf in my right ear. So with headphones in, I can’t hear what’s going on around me. This is great for the gym, but not so great for the trails I usually run. It has almost resulted in collisions with bikes. 

Recently, I learned about a new kind of headphone that conducts the sound through your jaw bone. This leaves your ears (or ear in my case) open to still hear what’s going on around you. After some research, I realized these headphones might be a safer solution for my running issues. And honestly, the headphones aren’t THAT expensive. But I still haven’t pulled the trigger and purchased them.  

In talking about it with a coaching friend of mine, I realized that I wasn’t taking my own advice. Two things I really value are my health and my safety. These headphones will help me live out these values by giving me music on my runs to keep myself healthy, while also keeping me safe. Running is also something I do with my husband, and family time is so important. So this purchase lines up well with my values and there is money in my budget…it really should be a no-brainer.

When you bring your values into the budgeting equation it can help clarify where to spend, save, or invest your money. It can also help you determine what to say no to. So, let’s learn about values based budgeting!

What Doesn’t Work

Before we jump into what the heck a values based budget is…and why you should use one, let’s take a look at what typically doesn’t work. I’m sure you’ve seen those budgets that tell you to spend a certain percentage of your income on housing, another percentage on food, and so on. You may even have tried to set your budget up this way.  And while it may have worked for awhile, it didn’t provide you with a sustainable way to budget in the long-run. The math worked, so why did the system break down?

It broke down because you are more than a number. You are an individual with your own habits (good and bad), goals, and desires. And a budget that simply tells you how much to spend on what doesn’t take anything that makes you unique into consideration. It also doesn’t consider where you live, your family makeup, or things outside of your control like inflation. For a budget to work, it has to make room for what makes you YOU. 

This is the benefit of values based budgeting. It puts who you are and what you’re working towards front and center in your budget. Keeping focused on your why and what drives you will help carry you through the tough times with budgeting. 

What To Do Instead

To understand how values based budgeting works and why it’s so important, it’s key to know exactly what I mean when I say values.  Sara Sutler-Cohen gives a great definition of core values, she states;

Core values are the root beliefs that a person or organization operates from. They are the principle perspectives that guide a person or organization’s behavior with others.

Sara Sutler-Cohen

In this, it’s easy to see why knowing your values can help with managing your money and making spending decisions. When your spending is out of alignment with your values, you are going to feel that misalignment. It is also harder to make good decisions. So, when you are ready to get started with your values based budget, first you need to identify your values.

Identifying Your Values

There are a few different ways that you can identify your core values. I’m going to walk you through the three that I typically use with my clients.

Method # 1: Use a List

First, you could look at a list of common values and identify those that resonate with you. A list that I like to have my clients use is Brené Brown’s Dare to Lead List of Values. This list of values also comes with directions to pick two that are most important to you. I usually have my clients pick two to three.

Read through the list and make note of the words that resonate with you and how you want to live your life. What is important to you? What do you strive to embody for yourself, those you love, or the world? Once you’ve identified the words you relate to most, narrow the list by finding those that are most important to you. It may be hard, but if you sit with it, you will find two or three words that guide what you do and how you live your life. 

Method # 2: How Else Would You Like to Get Paid?

Another way that you can identify your values is to play the following scenario out in your head. You wake up tomorrow in a world where all of your needs are taken care of. The catch is, you still have to work. Because you don’t need to pay for food, clothing, or shelter, you don’t need to earn money. How would you like to be paid? It could be in experiences, travel, time off to be with family, incentives to work out, or anything else. What would you choose? Often, when my clients imagine this scenario, it helps them determine what they really value.

Method # 3: Look at How You Spend Your Time

To identify your values, you can also look at the things you regularly make time for now. Time, like money, is finite. So when you are carving time out of your busy life for coffee with a friend, time with your family, or a run, you are spending time on the things you value. 

Knowing what you value and how it plays out in your life can help you determine where your money should go beyond paying for the essentials like food, shelter, and clothing.

Keep Your Values Front and Center

To ensure that your budget takes your values into account, you have to keep your values front and center. Write them down. Then, keep the list in the place where you make decisions. If you do most of your shopping on your laptop, keep a copy of your values on your desk. Put them in a note on your phone or even as your lock screen or wallpaper. I have our family values listed at the top of our budget. And I have my clients all do the same. This provides a useful checks and balances system as you’re reviewing past spending and planning out future spending.

It’s good to keep your values physically front and center as you’re doing different things. But it’s also important to keep them front and center as you’re making decisions about how to spend your money. To do this, as you look at your past spending and planned future spending and saving, ask yourself if the way you are using your money supports your values. Beyond the essentials that you have to spend each month to keep your life moving forward, what you save, invest, and spend on should help you bring your life more in alignment with your values.

Knowing your values can even help you when you don’t know what to do. If you are faced with two options for spending or saving your money, visualize having or doing both things. Then ask yourself a few questions. How do you feel in each case? Which choice gets you closer to the life you are working to build? How does each choice embody your values? These questions can often help you make the best decision for you.

Final Thoughts

So, what the heck is values based budgeting…and why should you do it? Values based budgeting is a way of managing your money that puts you in control. You determine your core values and the life that you want to build, and you use your money to help you do it.

It’s important to remember that money is simply a tool. It isn’t good or bad. It is just there for us to make transactions. You give up your time and energy at work to earn money. Then, you give up that money for things, experiences, and future stability. The emotions we give to money are ours. At the end of the day, money is neutral. But always remember, you can use money to help you build a life that is consistent with your values. You can also use your money to help you build a life you don’t want to escape from.

Want to learn about how I use my family’s values in our budget? Hop on over to my blog post “It’s About Values” and give it a read.

Are you ready to give up budgeting by some number someone else determined and to start a values based budget? Schedule a free 30-minute Clarity Call to learn about how financial coaching can help you today!

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