In the past, when you created a budget, you mapped it out on an excel spreadsheet, tried to live within your budget, had trouble sticking to it, and the promptly shoved that budget in a drawer. Never. To. Be. Seen. Again. I'm here to tell you that budgeting is no longer the wet blanket to your social life. You can be a baller on a budget. Don't believe me? Here's how - think about what matters most to you, your goals, and your ideal lifestyle and then adjust your spending to align with your values. Voila - you've created a value-based budget. With value-based budgeting, you're spending your hard-earned money on things and activities that matter most to you.
Try this exercise: Make a list of your values or what is most important to you (e.g., my friendships are important to me; I want to travel). Then, make a list of everything you spent money on the last few months. Go through each expense and ask yourself these questions:
Here's an example:
Expense #1: $150 spent on a typical Saturday night out with friends (dinner, dancing, transportation for 1 person) x 4 Saturdays this month = $600 monthly expense.
Values: I value my friends and spending time with them is important to me. I want to save money for travel.
- Am I proud of this expense or did I waste money?
- I had a great time, but $600 spent on 4 nights out in 1 month might be a waste of money.
- Did this expense align with my values?
- Yes, I spent time with my friends this month, but I wasn't able to save for travel.
- Is there a less expensive activity that I can substitute?
- Yes, I can vary my activities with my friends by hosting friends at my home, going to a less expensive restaurant, carpooling, etc.
- Budget for this expense.
- I'll decrease my Saturday nights budget to $300 per month, which will allow me to save $300 for travel.
Pro Tip: Automate your spending behavior. Take that expense that doesn't align with your values and turn it into savings by automatically depositing the amount of that expense into your savings or investment account. In the above example, since I'm use to spending $600, I'll automatically save $300 for travel and have $300 left over for my Saturday nights out.
Bonus: Zero Dollar Days - track how many days you can go without making a purchase that doesn't align with your values. Research has proven that if you wait 2 days to make a purchase, you are one-third less likely to go through with it.
Editor's Note: This blog post is part of the September 2017 edition of Odyssey NexGen Newsletter. Curious about Odyssey's NexGen program? Email Anne.Simpson@odysseypfa.com to learn more.
Reviewed & approved via C2C by BT 9/15/17