Create a Values-Based Budget in Three Steps: A Guide to Spending Wisely

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By the CBBCNJ Team

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Many people struggle with managing their finances, and often find it challenging to balance expenses and income. One proven strategy to improve the allocation of resources is values-based budgeting. This approach aligns your spending with your personal values, helping you make more intentional decisions about where to allocate your money. In this guide, we’ll walk you through three simple steps to create a values-based budget that can lead to wiser spending.

Step 1: Identify your core values

The first step in creating a values-based budget is to identify your core values. These are the principles and beliefs that guide your life and influence your decision-making. Examples of core values include family, health, education, spirituality, or community involvement. To help you identify your core values, consider the following questions:

  • What matters most to you?
  • What do you want to prioritize in your life?
  • How do you want to spend your time and energy?
  • What brings you happiness and satisfaction?
  • Which aspects of your life are non-negotiable?

Take your time reflecting on these questions and write down your answers. You may find that some values become apparent immediately, while others might require more thought. Once you have identified your core values, rank them in order of importance. This will serve as the foundation for your values-based budget.

Step 2: Assess your current spending habits

A Guide to Spending Wisely

Now that you’ve identified your core values, it’s time to assess your current spending habits. This involves analyzing your expenses to determine whether they align with your values. Start by gathering your financial records, such as bank statements, credit card bills, and receipts from the past three months.

Organize your expenses into categories

Create a list of expense categories that cover all aspects of your spending. This may include housing, transportation, groceries, utilities, insurance, entertainment, clothing, or personal care. Next, assign each expense from your financial records to its respective category. Finally, calculate the total amount spent in each category for the past three months.

Evaluate how your spending aligns with your values

Now that you have a clear picture of your spending habits, it’s time to evaluate whether they align with your core values. For each expense category, ask yourself:

  1. Does this spending align with my values?
  2. If so, is the proportion of spending appropriate relative to other value-aligned expenses?
  3. If not, can I reduce or eliminate this spending to allocate more resources towards value-aligned expenses?
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Note areas where your spending does not align with your values, and consider ways to adjust. This process will help you identify opportunities to reallocate resources towards value-aligned expenses and improve your overall financial well-being.

Step 3: Create and implement your values-based budget

With your core values identified and your current spending assessed, it’s time to create a values-based budget that reflects your priorities. This requires developing a spending plan that allocates your income according to your values.

Design your values-based budget

Start by listing your monthly income sources, such as salary, freelance work, rental income, or investments. Then, calculate your total monthly income. Next, create a list of fixed and variable expenses that align with your values. Fixed expenses are recurring costs that typically do not change from month to month, such as rent or mortgage payments, while variable expenses can fluctuate, like groceries or entertainment.

Allocate a portion of your monthly income to each value-aligned expense category based on its relative importance. Ensure that your total allocated expenses do not exceed your total monthly income. This may involve adjusting the allocation percentages or finding ways to reduce spending in certain areas.

Implement and monitor your budget

Once you have designed your values-based budget, it’s time to put it into action. Begin tracking your spending according to the allocations outlined in your budget plan. You may choose to use a spreadsheet, budgeting app, or simple pen and paper to record your expenses.

At the end of each month, compare your actual spending with your budgeted allocations. If you notice discrepancies, identify the causes and adjust your spending habits accordingly. Additionally, consider revisiting your core values periodically to ensure they still accurately reflect your priorities. As your life circumstances change, so too may your values and financial goals.

Remember, creating and maintaining a values-based budget is an ongoing process that requires commitment and self-awareness. By consistently evaluating your spending habits and aligning them with your values, you’ll be better equipped to make more intentional decisions about how to allocate your money and ultimately improve your financial well-being.

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