Creating A Values-Based Spending Plan

February 28, 2019

Note: Today’s post was co-authored by my colleague Laura Finn, who is a Senior Consultant at Financial Finesse.

Here at Financial Finesse, we talk to a lot of people about budgets (we often call them spending plans). We talk about tools to help you create a spending plan, tips to help and guidelines on percentages of take home pay you should allocate to housing, transportation, savings, etc.

But how do you account for the things you love, but don’t really fit into a traditional spending plan? A recent team exercise shed some light for me on something I had never really considered (shout out to Statia Thomas for this great idea) – why don’t we build our spending to reflect the things we value and enjoy the most in life? We decided to explore this concept more in depth.

What the “traditional way” is missing

As a financial planner, I champion the idea that operating within the confines of your spending plan is fundamental to reaching your goals. So then why do so many people struggle with this seemingly simple concept?

Our theory is that it’s not that most people don’t understand the concept; it’s that the spending plan may not be reflective of what truly makes you happy in your everyday life! While most of us have inherent needs for food, shelter, transportation, and saving for retirement, what about the other inherent “needs”? While I may value experiences (like travel or local concerts), others value more tangible items (Laura admits that she goes to Sephora so often, she uses their black-and-white bags to bring her lunch to work).

These examples may or may not resonate with you, but you probably have your own version of travel or Sephora. The key to success is to ensure that these things are captured in your spending plan and have their own line item. Trying to pretend as though they don’t exist will not only continue to thwart your short-term spending plan, it may keep you from hitting those long-term, larger goals.

What if you’re not sure what you truly value? Our solution is start with the person who knows you best: you!

Hack yourself!

The first step in making your values-based spending plan is to work to better understand yourself. What items and activities do you truly love? Do they cost money? Here’s a short list that our group brainstormed for themselves during this exercise:

• Vinyl record collection
• Graphic T-shirts
• Makeup and hair products and services (aka Sephora)
• Gym membership and spinning app
• Golf
• Travel

After making this list, we went around the group and shared if we budgeted for these items. The answers were mixed, but the bottom line is, most of us could refine our spending plans to better include the things that we loved most.

Maybe you like grabbing drinks with your colleagues, and your spending patterns truly reflect this. Let’s go a step further: If you find yourself at your favorite watering hole each week, how much are you typically spending there? And, more importantly, why are you there?

Are you there because you truly enjoy the environment, or is it the company you value? The bottom line is if it’s important enough to you, then it should have its own line item in your budget! But how much should you allocate? If you find that you enjoy the atmosphere, perhaps you can find ways to lower your tab there by eating or drinking less, or, if it’s the company you value, perhaps you can find a less expensive way to get together (such as hosting at someone’s home twice a month).

The bottom line is, there are trade-offs here. And frankly, if you truly love your outings as they are, find another trade-off within your spending plan. For instance, if you care less about what kind of car you drive than spending time with your friends, perhaps keep this in mind when it’s time to make your next purchase.

Making it about you instead of what society may be saying

The overriding message here is to make your spending plan a true reflection of who you are and what you love rather than making it follow anyone else’s ideals and guidelines. We all need shelter, but does the big house (with the large rent or mortgage) really make you happy? Maybe cut that back to spend less there in order to spend more on your record collection or makeup.

The goal is to shift your mindset to have your spending reflect what YOU value as opposed to what the world around you tells you is important. What a cool lens to view your spending plan through! If our spending aligns with what we value, might more of us be able to stick with a spending plan long term?

A mindset shift, but don’t forget the basics

We need to be clear here. We are not suggesting that you stop saving for emergencies or retirement in order to spend more on the things you value. Rather, changing our mindset about where we spend money and understanding the “why” in our spending patterns can help us establish a healthier relationship with our money.

Be gentle with yourself and don’t go it alone

This is always true when we are trying to make any change in our lives – it’s bound to be tough. Let’s take trying to be healthier for example. It never happens overnight, and we will always have stumbles along the way. This is natural and even healthy, if we don’t let that discourage us to the point of giving up.

Let your spouse or a confidant know what you are trying to do and ask them to be an accountability partner to help you stay the course. Having support can make all the difference!

This was such a fun exercise for us and I am so excited to share this with all of you. I hope this helps if you have ever struggled to stick to a spending plan.