Values-Based Budgeting: An Alternative Approach
Traditional budgeting methods often prioritise numbers over values, which can leave individuals feeling disconnected from their true financial aspirations. Values-based budgeting, on the other hand, empowers individuals to align their discretionary spending with their core values and priorities. In this article, we’ll explore what values-based budgeting is, how to implement it, and the benefits it can bring to your financial life.
WHAT IS VALUES-BASED BUDGETING?
Values-based budgeting, also known as conscious spending or mindful budgeting, is a financial strategy that allows individuals to connect their financial decisions with their deepest values and passions, which is especially important in a time of rising costs that reduce funds available to allocate towards discretionary spending.
Rather than the immediate focus being on what to cut out (i.e. a ‘negative screen’), it is instead about understanding the things that are important to you and which make you feel good (i.e. a ‘positive screen’) to allow you to redirect your spending towards them.
WHY CHOOSE VALUES-BASED BUDGETING?
Values-based budgeting provides many benefits, including:
- Increased Fulfillment: Values-based budgeting brings a sense of fulfillment. By directing your financial resources toward what truly matters, you’ll experience a greater sense of purpose and happiness.
- Reduced Stress: Unlike traditional budgeting, values-based budgeting provides flexibility and reduces guilt associated with occasional indulgences. This can be especially comforting when essential expenses are on the rise.
- Alignment with Goals: When your spending aligns with your values, you’re more likely to achieve long-term financial goals, whether it’s saving for a home, funding education, travelling to a new country or supporting other family members amidst increasing living costs.
- Better Decision Making: Knowing your values simplifies decision-making, especially when facing rising costs. You can quickly evaluate whether a purchase aligns with your values and is worth the outlay.
- Enhanced Financial Well-Being: Over time, values-based budgeting leads to improved financial health. You’ll save more, reduce debt, and build wealth while navigating the challenges of increasing fixed costs of living.
IMPLEMENTING VALUES-BASED BUDGETING
There are several steps involved in implementing a values-based budgeting approach to your personal finances:
- Identify Your Values: Start by identifying your core values, which may include things like family, education, financial security, health, travel, community involvement, environment, or personal growth. Take time to self-reflect and write down a list of what truly matters to you.
- Create a Values-Based Budget: Allocate a portion of your discretionary income to each value using budgeting tools or spreadsheets. This ensures your spending reflects what matters most to you.
- Track Your Spending: Regularly monitor expenses to ensure they align with your values and address the increasing costs. Use budgeting apps to categorise spending effectively.
- Adjust as Needed: Be prepared to adjust your budget as your values and priorities evolve, and as the cost of living continues to change.
- Be Mindful: Cultivate mindfulness in spending decisions. In a world of rising costs, ask if a purchase aligns with your values and is a wise expenditure given what is important to you.
Values-based budgeting is about creating a spending plan that resonates with your key aspirations and values. It can lead to better financial outcomes, a sense of contentment, and purpose in your financial journey.
If you would like assistance with implementing a values-based budget, contact our office to arrange a time to meet with your adviser to discuss this further.