Welcome to the values-based budget user guide! This is the third budget user guide of five in a 6-week series.
A common issue Americans have with budgeting is the feeling of restriction.
I know many budgets always say to cut expenses and usually instruct to cut out all the enjoyment.
That’s the reason most people choose to ignore budgeting altogether. A CNBC Survey found 33% of Americans do not have a financial plan.
This is a huge mistake; The Penny Hoarder Survey found people who do not budget typically owe $51,000 or more in credit cards and loans.
The values-based budget is the opposite of what you are used to seeing.
You will get to use your core values to decide which expenditures are the most important to you and which ones are not.
The main idea is to keep your happiness level high to make it easier for you to stick with it.
“To be happy, drop the words “if only” and substitute, instead, the words “next time.”
– Smiley Blanton
You will learn how the values-based budget works, how to find your core values, the steps to build it, and manage it effectively.
How It Works
A values-based budget is a unique approach to successful budgeting. You use your core values to categorize your spending.
If making a purchase does not align with your core values then you will choose not to follow through with the purchase.
Here is a good example.
A vegetarian does not eat meat products because it goes against their core belief not to harm animals for food.
They want to preserve animal life above all costs.
Find Your Core Values
There are several methods out there to find your core values.
It is a good idea to take time now, to create a list of 6 to 8 core values you cherish the most.
“Success is following the pattern of life one enjoys most.”
-Al Capp
Here are some ideas from Psychology Today on how to start figuring out your core values.
- Reflect on whom you admire, why they are important to you, and what you admire about them. The answers will lead you to some core values.
- Use an online values inventory located here
- Evaluate how you make choices over the next couple of weeks. What core value helped you make those decisions?
- Self-reflection – Take a closer look at the most exciting moments and most hurtful moments of your life. What core value was involved to create the excitement or the pain?
Values-Based Categories
When creating your budget you will use these core values to decide what to include or exclude from these three categories.
- Basic needs to survive
- Wanted spending based on your core values
- Extra’s for trimming the least important areas of your budget
Pros and Cons
Pros
- Define core values to prioritize spending that really matter to you
- Your paycheck doesn’t buy only needs
- Able to live your best life now
- Stop putting off certain goals because of a strict budget
- Finally enjoy budgeting
- Easily adaptable and flexible
- Combine ideas from other budgets with this method to customize your finances perfectly
- Higher level of happiness overall
Cons
- Core values can be difficult to pinpoint in the beginning
- Your values will change over time
- Could encourage impulse buys just because it aligns with a core value
- Can be difficult to break away from spending habits you were raised with
- Deep debt without money left over will make it difficult to stick to your core values
- Still need to track your spending regularly
- Fail to plan for retirement or emergencies because you are living in the moment now
Catch Up on the Beginning of the Series:
How to Create a Budget for Beginners
5 Types of Budgets for Beginners
How to Create a Biweekly Budget that Actually Works
Discover 9 Easy Steps to Create Your Cash Envelope System
Steps to Create Your Values-Based Budget
For those of you following along with this 6-week series, you will start to see similarities in the budget creation steps.
The familiar steps are the most crucial ones for budget creation.
Set your budget goal
Starting a budget without a clear why will fail before you even begin.
Do you want to save money, pay off debt, or spend your money differently?
The goal you choose is not set in stone and can easily change over time.
Gather last month’s financial materials
You need to know how you spend money and how much you earn.
The best way to do that is to look at your financials from the last month.
Below are some suggestions on where to find it all.
- Your free credit report
- All of your bank statements from last month
- Credit card statements from the previous month
- Open all of your mail
To make this step super easy, download the free checklist below. I created it to help you gather all of this information quickly.
It also includes instructions on where to find your free credit report. This checklist is part of the Budget & Debt Payoff Planner in the Budget Planners Shop.
LOCATE/GATHER YOUR DEBT CHECKLIST DOWNLOAD
Create your master list of expenses
After you find all of your financial materials, use them to create a master list of all your debts and expenses.
Include in your master list the next bill due date, monthly payment amount, who you owe, and the total pay-off amount for debts.
Also, take note of how much you earn each paycheck.
You will want to make sure you have enough money to cover all of your expenses.
As another time-saver, download the “List of Debt Worksheet” below. It is completely set up for you.
This worksheet is also part of the Budget & Debt Payoff Planner in the Budget Planners Workshop.
LIST OF DEBT WORKSHEET DOWNLOAD
More Articles You May Be Interested In:
How to Save Money on a Tight Budget
What Happens If I Don’t Pay My Credit Card Bill
How a Grocery Price List Can Save You Money
Start categorizing your expenses based on your core values
Using your expenses master list and your core values list, start writing down which expense categories you want to keep and what to let go of.
What previous purchases are you happy about?
Which ones are a disappointment?
What do you want to start including?
Identify the extra’s that did not fit into your core values
Anything that does not align with your core values will be cut from your budget.
If you are short on cash to cover the necessities this is how you will free up cash.
Build your values-based budget
For this piece, we are going to adopt a step from the biweekly budget method.
On a calendar mark all of your paydays for the next month.
Using the due dates from your expenses master list create your budget for that payday.
For example, I am paid biweekly and receive a paycheck on 02/25/22 as well as 03/11/22.
My next budget will reflect only the expenses from 02/25/22 to 03/10/22.
How to Manage This Budget Method Effectively
Adapt your budget
Again, for those of you following along through this 6-week series, you can already anticipate what I am about to say.
Budgets, regardless of the method, only work if they fit your current spending habits.
After each month, review what you actually spent in each category compared to what your budget said.
Adjust your numbers to reflect what you actually spent for the next month’s budget.
Budgeting is not about changing your habits instantly.
It is about controlling your money instead of letting it control how you live.
Do not dwell too long on your core values list
Deciding which core values to choose for your expense categories can take a lot of your time.
Use your previous spending habits as a guide of which core values to choose for now.
Instead of going philosophical, trying to figure out who you are, focus on which expenses make you happy and which ones do not.
You can always update this list at any time.
Track your spending
Regardless of the method, you need to keep track of your spending.
The idea is to make sure you no longer overdraft your bank account.
There are digital apps that can help with this automatically.
For more information, review the post, Discover 9 Easy Steps to Create Your Cash Envelope System, and scroll to the digital apps section.
My best tips are always, to know where your money is going.
Do not take on new expenses until you know your budget is solid and how much you earn.
More Articles You May Be Interested In:
How to Save Money on a Tight Budget
What Happens If I Don’t Pay My Credit Card Bill
How a Grocery Price List Can Save You Money
Concluding Thoughts
But what if the values-based budget does not work for my situation? I have you covered.
There are two more budget user guides coming your way over the next two weeks.
If this one particular budget does not work for you, then try a different one.
Here are the other budget types headed your way in order of their release:
In addition, the upcoming budget guides will be written with a similar structure as this writing.
I designed it that way to make it easier for you to compare budget methods as well as try them out.
If you missed the first 4 posts in this six-week series I encourage you to check them out below.
How to Create a Budget for Beginners
5 Types of Budgets for Beginners
How to Create a Biweekly Budget that Actually Works
Discover 9 Easy Steps to Create Your Cash Envelope System
The first 2 posts go into more detail on basic budgeting regardless of the method you are using, along with a summary of how each of the upcoming budget methods work.
Happy Reading!
References
https://www.cnbc.com/2015/04/29/one-third-of-americans-lack-a-future-financial-plan-study.html
https://www.thepennyhoarder.com/budgeting/budgeting-statistics/
https://www.lifevaluesinventory.org/
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