This Valentine’s Day, love your finances by practicing value-based spending.
In today’s economy, you’ve probably heard a lot about saving and budgeting. While responsible spending is key, only purchasing necessities can get frustrating. So, instead of changing your saving-based habits, consider changing your outlook on spending.
Have you heard of Value-Based Spending?
Value-based spending means investing in things that bring you joy, satisfaction, and a sense of accomplishment and purpose. Simply put, this means understanding the advantages of each purchase, and the costs associated with it.
For example, does a $15 movie ticket provide you with the same long term satisfaction as one month of your Netflix subscription? Are your purchases striking the balance between joyful and a good investment?
Value Based Spending can include purchasing for:
- Health and Wellness
- Such as a gym membership, fees for recreational sports, hiking equipment, fresh produce, etc.
- Relationships and Connection
- Taking a loved one out for dinner, going on a trip with friends, buying a present, etc.
- Getting a haircut, taking an unpaid mental health day, buying a book, getting a massage, and more.
- Personal growth and education
- Taking guitar lessons, online courses, dance classes, etc.
- Vacations, backpacking trips, semesters abroad.
And several other activities that represent what you want to get out of life, or simply bring you joy in the short and long term.
Now, value based spending isn’t an excuse to give up saving all together. My $6 lattes bring me joy – but I know I can’t afford one every day; and in the long run, caffeine and sugar are not contributing to my overall health.
Where to start?
Start by setting up a budget based on your values. Your values already dictate your everyday spending–if you’re mindful of how, it’s easier to budget.
If you’re seeking adventure, you’d probably prefer to spend less on rent and more on travel. Whereas someone who is more of a homebody may spend more on home improvements than vacations and experiences.
Your values may extend past what you spend on, and may represent what companies you choose to support. Perhaps, you have strong feelings regarding clean eating, so you choose to avoid cheaper fast food joints. Maybe someone else refuses to participate in fast fashion, so their clothes cost a little more, but represent their ethical beliefs.
Once you have a clear understanding of your values, you can start your financial budget.
Your Top Three Value Categories
Once you’ve determined what your financial values are, try and narrow it down to your top three.
Your top three should strike a balance between what brings you the greatest sense of joy, while still giving you a high return on your investment.
For example, my top three are:
- Experiences – as a personal choice, I prefer to spend money on experiences rather than things. This includes travel, rock climbing, concerts, etc.
- Education – I find I rarely regret purchases that result in an advanced skill set. This category encompasses tuition fees, books, online courses, museum visits, and more.
- Self-care – Purchases that contribute to health and wellness are an important part of my overall happiness. Some things that I consider selfcare are my gym membership, skincare products, fresh fruits and vegetables, etc.
Determining your top three value categories helps you to look at spending as a long term investment, rather than short term gratification.
Review your values
As you grow older, your values are always adapting, so make it a point to review your budget once a year. Maybe, you have decided you would like to repay your student loans on a shorter timeline; and this goal may take priority over other financial goals.
Remember that value-based budgeting is about more than just reorganizing your finances. It’s about developing a healthy relationship with money and spending. You don’t have to feel guilty about splurging every once in a while, but you should understand that what you buy reflects who you are–so buy the things that represent who you want to be.