Is values-based budgeting for you?

Budgeting is an essential life skill that many people need to learn to make sure their salaries last them the entire month.

There are many methods of budgeting you can employ. The most popular ones include the 50-30-20 rule budget and the 70-10-10-10 rule budget. But some who try these methods find the structure to be too constraining, which eventually becomes the main reason they fail to follow it through.

If you’ve ever tried to budget before and failed, don’t feel discouraged. Maybe you just haven’t found the right budget method for you. If so, we recommend giving values-based budgeting a try.

How to budget money effectively with values-based budgeting

Values-based budgeting is a method that focuses on creating a budget based on what you value the most.

According to The Penny Hoarder, “A fun way to think about it is this: If your employer paid you in something other than money, what would you want it to be? Plane tickets? Sought-after sneakers? The latest tech gadgets? You can’t ignore paying for the necessities—like a roof over your head and food on the table — but this budgeting method asks you to make mindful choices about how you spend the rest.”

So instead of following a rigid structure to budget your finances, you focus on allocating and spending your money based on what provides you with maximum happiness or value in life, while less goes to areas that mean little to you.

Advantages of having a values-based budget

It’s hyper-personalized. The reason many people fail at budgeting is they find it too rigid for their lifestyle. With values-based budgeting, you can make a budget that makes sense to you and your needs. It allows you to put money towards things that you deem important in your life. Whether it’s a future trip, your retirement, a gadget, or your savings, you can specify how much of your salary goes towards this each month and build around it.

It prevents impulse purchases. Many people fall into the hole of making impulse purchases because they feel deprived. An impulse purchase is a form of rebellion against that feeling of deprivation. With a values-based budget system, you’ve already considered what you want to spend money on and actively work towards it, so you don’t feel like you’re depriving yourself of anything.

How to create a values-based budget

Find out what you value. Because this type of budgeting revolves around what you value, you need to figure out what is valuable in your life. Write these things down in order of greatest to least importance.

Some things you may want to include on your list may be:

• Spending time with others
  
• Traveling
  
• Advancing your technical skills
  
• Your hobbies
  
• Gadgets

Take a look at your current spending. You need to have a baseline for your current spending. If you’re not currently tracking your expenses, you can do this by either checking your past online shopping purchases or online bank statements.

Common expenses to budget include:

• Commuting
  
• Gas
  
• Subscription services
  
• Dining out/take out
  
• Drinking
  
• Traveling
  
• Shopping

Looking at your current expenses shows you where your priorities are and if they are unbalanced. Should it be improved or changed in any way? Compare your current spending with your values list and see how they differ.

Make a list of the things you don’t value. Don’t discredit this step as it can help you weed out things you don’t need to spend on! Find things that don’t add value to your life or that don’t excite you.

These could be:

• Trendy or designer clothes
  
• A new car
  
• Concerts
  
• Movies
  
• The latest gadgets

See what you can cut back on. If there are any discrepancies in your life between your current expenses and your values, go back to your current budget and see where you can cut costs and reallocate the budget.

For instance, perhaps you can spend less on shopping so you can add to your travel fund. Or maybe you can cancel some of your monthly subscriptions and set aside what you would have spent so you can save towards purchasing your own home someday.

With values-based budgeting, keep working with your list and finding ways to move things around to fund your top priorities. Hopefully, this highly personal way of budgeting is an easier way for you to stick to your budget.

Let Metrobank assist you in your financial journey. Open a savings account with us so you can easily organize and manage your money.