You probably already know that budgeting is a good idea. It can help keep you out of debt and enable you to have enough money to do what you want with your life. But the idea of creating a budget might seem boring. Or scary. Or just overwhelming.
A better way to approach budgeting is called values-based budgeting, which includes figuring out what really matters to you and staying mindful of those values when you spend your money.
Use money as a tool to boost your happiness
By giving your money meaning and purpose, it can bring more lasting joy. You can boost your happiness when you figure out what matters to you and live—and spend—accordingly.
“One of the keys to finding happiness with money is to stop spending on stuff you don’t actually care about in life,” says Brian Ford, head of financial wellness at Truist.
Now, we’re not saying to prioritize your wants over your needs when building a values-based budget. Even if you don’t enjoy spending money on bills or saving for emergencies and retirement—those needs must come first.
Bright Dickson, Truist’s resident expert on positive psychology, says values-based budgeting can help you feel empowered over your financial choices.
“Over time, if you’re spending based on what matters to you, then your behavior and your values are in alignment. And that makes us feel a sense of integrity,” she says.
Dickson also says that just the act of creating a budget can make you feel better about yourself.
“Sitting down and going through your expenses can give you a massive sense of self-efficacy,” she says. “Building that skill of understanding where your money is going builds that confidence.”
Be clear about what matters to you
Start building a values-based budget by determining your core values. One way to do this is to make a list of what really matters to you, such as freedom, family, travel, spirituality, or your dog. Then delve deeper.
“It’s not enough to just say ‘family matters to me,’” says Dickson. “Get more specific. What is it about family? Is it that I value creating a safe world for my kids?”
Or, if fun matters to you, Dickson says to ask yourself what fun means for you. Is it theme parks, or is it being outdoors? Keep asking yourself questions until you really get to the core of each value. Then list those in sentence form, like, “I value eating out because I get to experience new restaurants with people I love.”
Another trick for finding your core values is to take an honest look at your spending. When he’s helping people discover their values, Ford says he often finds that people’s spending habits don’t match up to their values.
“I’ll look at their list and say, ‘Look, this is great. You can tell me all day long what you care about in life. But let’s look at your bank account. Let’s actually go look at the way you’re spending your money.’”
You might be more into shoes than travel, and that’s OK. What’s important is that your list of values is honest.
“When we get into values conversations, we judge around values. I would advise people to watch their self-talk and their self-judgment as they go through this process,” Dickson says.
Let your values shape your budget
Once you’ve figured out your core values and have a solid list, create your budget using this helpful worksheet.
- Start by looking at your bank account. The goal is to have a positive net cash flow at the end of every month; in other words, you want more coming in than going out. This way, your money works for you, giving you a choice in how you spend it.
- Add line items that align with your values. For example, if you value voluntourism, make saving for those trips part of your budget. Setting long-term goals based on your values can motivate you to save for what matters. So when you’re tempted to go crazy in the plant store, you can be mindful and ask, “Is buying these succulents in alignment with my values and my long-term goals?”
- Keep in mind that you need to cover the basics. “I would never want someone to use values-based budgeting as an excuse to spend more than they can afford,” says Ford. “It doesn’t matter how much you value something—if you don’t have the money, you can’t afford it.”
- The rest is up to you. Once your basic needs are covered, you’ve put some income toward your savings, and you’ve got money left over, spend on what brings you joy.
“Once you’ve created a budget that’s roughly based on the things you care most about in life, you can go to your checking account and look at how you’ve been spending your money. Then you can really say, ‘Is my money going toward things I care about?’ If it’s not, you can make some adjustments,” says Ford.
