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Values-Based Budgeting: Aligning Your Money with Your Goals

Tired of not knowing where your money is going and feel like you’ll never have the life you’ve been dreaming of? Perhaps it is time you start  values-based budgeting. In this post, I’ll explain what the values-based budget is and how the spending plan will set you on the path to achieving your life (and financial) goals. 

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Learn How to Create a Values-Based Budget on YouTube

Let’s play a visualization game.

I want you to think of a tool that allows you to live the exact kind of life you’ve always dreamed of living. Perhaps it allows you to travel more, or maybe even it allows you to quit your job and pursue starting your own business– or maybe it just allows you to live in that downtown apartment– excuse me, LOFT– that you’ve always wanted.

Or maybe your dream life is a little simpler than that– maybe it’s just being able to pay for your bills without worrying where the money is coming from, or maybe it’s sending your kids to college without them having to take any loans.

You have that tool in your mind that will allow you all this magical, dream-like stuff? What does it look like? A big shiny button that you just press and poof all your worries go away?

Bet it didn’t look like a budget. 

But Clo Bare is here to tell you a values-based budget is what you’ve been looking for. It is the ultimate tool to help you achieve the life you want. 

values based spending

What is Values-Based Spending?

Values-based spending is a budgeting philosophy focused on guiding users to spend money in the areas of their life they value most. 

In a recent article by the Penny Hoarder, Nicole Dow explains values-based spending as follows

“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.”

Basically, instead of focusing on budgeting for the sake of budgeting– you instead focus on spending your dollars in areas of your life that will provide you with maximum happiness or value and spending less on the areas of your life that don’t add value to your life. 

Why I Love Values-Based Budgeting and Spending

1. Values-Based Budgeting is Hyper Personalized

This approach works for me because I don’t like a needlessly rigid approach that follows arbitrary rules put in place by financial experts as wide-sweeping advice that everyone should follow. I’ve said it before, but personal finance is PERSONAL, which is why it’s ridiculous to assign rules to spending that are the same for everyone in every situation. 

Budgeting Rules: The 50-30-20 Rule and Why I Don’t Like It

For example, I am not a fan of the 50/20/30 budget rule. If you’re not familiar with it,  the 50/30/20 budget rule dictates you divide your after-tax income and allocated it to spend 50% on needs, 30% on wants, and 20% on savings. While I think it’s a perfectly fine guideline if you have no idea what to do with your money– overall, I think it’s kind of terrible for a few reasons. 

First– it’s not a good rule for building wealth because it incorporates lifestyle inflation into the rule. If you’re focusing on spending percentages, then that means every time you get a raise, you spend more because your budget is based on percentages, not an actual dollar amount. 

Secondly, unless you make a crap ton of money, saving 20% of your income is never going to make you wealthy, but you MIGHT be able to retire someday once you hit your 60’s.

I, personally, would prefer to retire before then.

Another reason I don’t like this budget rule is it doesn’t account for at all what your priorities are. My priorities include retiring early someday. I can’t do that by saving 20%, I need to be saving as close to 50% as possible, and even more if I can.

Perhaps your priorities are that you want to travel more so you may skimp on your housing costs and put more into the “want” category so you can spend more on traveling.

It’s just kind of silly to assume that a budget that works for me will work for someone else. Which is why the values-based budgeting is something I’m a big fan of. It’s an extremely personalized way of managing your money which makes it easier to stick to because you’re focusing on the things that matter most to you. 

2. Values-Based Budgeting Prevents Impulse Purchases

Another reason I like values-based budgeting is it helps prevent impulse purchases because the budgeting system already takes into consideration what you want to spend money on. I find when my budget is too rigid, I do well for a short period of time, and eventually spend a crap ton on some random thing I didn’t even actually want. 

Like restrictive dieting, restrictive budgets are recipes for binges. Values-based budgeting works your wants right into the equation and even encourages you to spend more on the things that mean the most to you. 

For me, because I know my money is managed to provide me with the best version of my life– I feel less inclined to impulse shop even if there are certain areas of my budget that are a little more strict than other parts.

Why? Because being more strict in certain areas of my budget helps me to spend more in areas of my life that really matter. 

Which brings me to the most important reason why I love values-based budgeting…

3. Values-Based Budgeting Allows me to Live the Life I’ve Always Wanted to Live... Now.

Values-based budgeting helps me live the life I want to live right now. It doesn’t make me wait to live my life until I have all my debt paid off or until I have enough money to retire. This budgeting tool incorporates the things that are most important to me into my life, right now… as long as I stick to my budget. 

In a way, utilizing values-based budgeting is kind of like a road map and safety net to make sure I’m living in a way that is aligned with my values. I work with my numbers to make sure I’m spending the most money in the areas of my life that are most valuable to me– like travel, my home, and debt repayment.

Because I’ve crunched the numbers, I no longer use not having money as an excuse to not travel. I no longer make excuses for why my debt isn’t getting paid off faster. And even more importantly, I don’t stress or worry about how I’m spending money because I know my money and spending habits are working in my favor. I’ve designed a budget and a life that actively works to align my life with my highest values. 

Pretty cool, huh?

Values-based spending gives me control over the things that I thought I had no control over. Because the thing is, all the things I don’t want to spend money on, are usually things I can alter and even get rid of in order to have more money to do the things I want to do.

Have I sold you yet? Or does it still seem like something that is too good to be true or impossible?

How about we talk about how to create that values-based budget?

values based budgeting

How to Create a Values-Based Budget

1. Soul-search ie. Figure out What You Value

Do you know what you actually value? 

Can you list it off immediately without even thinking or is it something you haven’t really considered before?

Like the Penny Hoarder said– if your employer paid you in something other than cash, what would you want it to be? Plane tickets? A big fat savings account for your kids’ college? More time off to spend with your family? Write it down, and try to order it in highest value to lowest value.

For me, I value the following:

  1. Time
  2. Spending time with people I love
  3. Travel
  4. Living somewhere I love to live
  5. Advancing my career
  6. Working on my passions

What does your list look like?

2. Take a Look at Your Spending 

If you haven’t done this exercise before, prepare to be a little (or a lot) surprised. You can either look through past bank statements or prepare in advance by tracking everything you spend money on for 2-4 weeks. Either way, when you have information on where your money goes, start to drop this into categories. 

How much did you spend on drinking and eating out?

Travel? Home? Dating? Subscription services?

When I did this the first time, it was a rude awakening. I blew almost $600 in two weeks on eating out, drinking, dating, and being hungover. 

How’s that for priorities?

Read about the first time I tracked everything I spent money on for 2 weeks in “I am $67,866 in Debt”


Look at your spending and be honest with yourself. What does your spending reflect? How is your spending revealing your priorities and in what ways is it unbalanced? What surprises you and what disappoints you? 

Compare your spending list with your list of values and take note of the differences.


3. Make a List of the Things you Don’t Value

This is almost as fun as making a list of the things we do value! The reason this step is important is because it will help you define areas of your life where you might be able to cut back. 

A note on this one– it’s totally okay if the things I don’t value are things you value. No judgments here, my friend. The point is NOT about judging what other people value– the point is understanding what brings you a fullness to your life so that you can focus on dedicating resources and energy to those things. 

Here’s some of the things I don’t value:

  1. Having the latest technology or gadget
  2. Fashion
  3. A new car or fancy car
  4. Trying the latest restaurants or bars
  5. Attending concerts, festivals or sporting events


What are some of the things you don’t value? Do you see things you don’t value in your spending? Can you cut those things out in order to spend more money on the things you do value?

4. See which areas of your life you can cut back on in order to put more money in the areas you value most.

Now that we see the discrepancies between where we spend our money and where our values are– it’s time to take a look at our budget to see where we can cut dollars in order to dedicate those dollars to what we value most.

When I did this for the first time, I decided I wanted to spend less on eating out drinking out in order to save more money, dedicate more money to my travel fund, put more money down on debt, and get financially stable enough to live without roommates. 

Since I had spent $175 on alcohol, $364 on eating out in just two weeks, I had plenty of room to cut down and reassign those dollars to more value-aligned categories like debt repayment and travel.

I started by allocating $150 every two weeks to my “Entertainment” category, which would include drinking, eating out, and anything else entertainment related. That meant I had an extra $389 to dedicate elsewhere, and that’s JUST with altering my entertainment budget.

Where else could I cut down?

Last year I took another hard look at my budget because even though I’d been implementing values-based budgeting, I was still spending about 62% of my take-home income.

I really wanted that number to be closer to 50% so I started looking at my numbers and identifying areas where I could reduce spending that wasn’t important to me. This is where analyzing your previously deemed “essential spending” comes into play.

5. Evaluate those “essential expenses”

Sometimes we list things as fixed or essential expenses when we haven’t ever considered how we can either reduce those expenses or possibly even get rid of them. For example– I though transportation was a fixed cost for me. In my last fiscal year, I spent over $300 per month on transportation. $300! As I see that number now, I’m blown away by it. That doesn’t even include the car payments I made during that year because I put those numbers under the debt category. 

When I first ran my numbers for the year, I was pretty disgusted that transportation ate up almost $4,000 of my budget last year because I can’t say owning a car is really something I value. And it eats up a lot of money. My insurance alone was $150 a month, but then there were costs to maintenance, parking, car stickers, and registration. And that’s just for the car– I also used public transportation and Ubers while living in Chicago and was always an additional cost.

So what did I do this year to change that?

I sold my car because I was able to negotiate a company car into my last promotion.

I stopped taking so many Ubers and decided to use public transportation whenever possible. 

And I am on track to only spend $1,500 on transportation this year. That frees up $2,500 of my monies to use for OTHER THINGS THAT BRING ME JOY! 

That’s nothing to sneeze at. That’s serious cash that can help me pay off debt faster or go on more trips.

What are you spending money on yearly that might be something you can reduce? Are there items in your budget you can be reallocating elsewhere?

6. Use that “found money” to go towards your high-value categories

Now that you’ve identified areas where you can possibly spend less money– start reallocating that money to your values! Found a way to spend less on your cell service and now you have an extra $100 to put into your travel fund?

Do it. 

Got an extra $2k a year from not having a car that you want to spend on eating out every month? Do it. Take a look at the areas of your life where you highly value and would like to spend more resources on, and create that opportunity within your budget.

For a step by step guide on how to create a budget, read “How to Create a Budget.” 

Ideally, a budget is more than just a way to manage your money– it’s a way to guide you towards the life you want to live. Whether that means spending more money on travel and less money on where you live– your values-based budget is a tool to make those dreams a reality.

Your Turn

What are some of the things you spend money on? What does your values-based budget allow you to do that you couldn’t have without it?

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Values-Based Budgeting: The Ultimate Tool for Achieving Your Best Life
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Values-Based Budgeting: The Ultimate Tool for Achieving Your Best Life
Tired of not knowing where your money is going and feel like you’ll never have the life you’ve been dreaming of? Perhaps it is time you start a values-based budget. Clo Bare has you covered. In this post, she’ll explain what the values-based budget is and how the spending plan will set you on the path to achieving your life (and financial) goals.
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Clo Bare
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