What Is Value-Based Spending? How to Give Your Money More Meaning

While it’s a great idea to have a budget and stick to it, sometimes being too frugal or too spendy can end up hurting you in the long run. When you have a strict budget, it can help you stay out of debt and give you more options in life, but what’s the point if you’re so frugal, you don’t get to enjoy your money?

And if you spend too much, you may not have enough leftover for retirement or to enjoy the things you love. Here’s where mindful budgeting and value-based spending comes into play and how it can help you spend money on the things that matter most.

Value-based spending is a personal finance approach that involves aligning your spending habits with your values, priorities, and goals. It’s a way to look within yourself and your internal metrics to figure out which purchases will give you the best return.

This concept should help make spending decisions easier and wiser because you’ve had time to figure out what matters the most to you, and it’s a chance for your purchases to make a statement about the things you value most in life.

When you spend based on your values, you're essentially paying for products and experiences that make you happy and eliminating the rest. For a person who loves fashion, it could mean investing in a designer resale bag because you care about sustainability. Someone who loves the great outdoors may purchase a new mountain bike for more outdoor exercise.

If you spend money on things you don't care much about, you may miss opportunities and experiences to invest in things that matter most to you. If your friends love fancy restaurants and you're happier with to-go Thai food (and you're dreaming of visiting Thailand), you may want to cut back on the expensive dinners to save more money for your dream trip.

If you’re serious about putting your financial values into practice, you need to prioritize your spending and saving and build a financial plan around them.

So, how do you set up a value-based budget? Here are three steps to help you get started with a budget that’ll more closely align with your values and goals.

Define your financial values: If you already know your financial values, then you’re one step ahead. If you have a hard time figuring it out, you may want to think about what your perfect life would look like. Where do you want to live? What will you be doing? What brings you the most joy?

Once you’ve answered these questions, you can figure out whether your spending and saving habits align with your goals and financial values.

Review your bank statement or monthly budget: Match your expenses to each financial value you’ve identified. Categories can be anything from rent to utilities and clothes. Create a spreadsheet to keep track of expenses.

If you don’t have a budget, create one to learn how to become a more thoughtful money manager.

Track your spending: It’s time to put your plan into action! To get started, schedule a monthly budget check-in where you run through a financial checkup to look at expenses over the past month and cross-reference them with your values.

Closely examine your expenses and figure out if there’s a way to eliminate them or find a cheaper product or service.