When it comes to budgeting, it is easy to get caught up in the numbers and calculations. Many people believe that finances should be treated with strict rules, but the truth is that our values are very powerful and guide our decisions regarding money. This means that your personal values affect your finances. After all, when your values and budget are in alignment, your spending becomes purposeful.
What Are Personal Values?
Values are beliefs and principles that help guide your behavior and decisions. Not only do they reflect what is most important to you, but they can also serve as your internal compass. It doesn’t matter whether you value freedom, security, comfort, family, or growth; what matters is how you align your decisions with those values.
Your values can influence everything, including:
- Your career choice
- Ways that you spend your time
- How you can relate to others
- Habits you use to manage your money
When you are clear on your values, you can make grounded and intentional decisions.
If you’re looking for more information on how your values affect your overall life, I suggest reading 7 Habits of Highly Effective People*.
Why You Need To Know Your Values?
Financial health is defined not only by facts, but also by your feelings. Understanding what you value within your life helps you to take steps towards building a life that feels meaningful and fulfilling to you. Without that awareness, you will constantly be chasing goals that are the latest trends. Spending money toward goals that don’t resonate with you will inevitably leave you feeling like something is always missing.
When your spending is disconnected from your values, it won’t matter if your income increases and your debt decreases. If you are dissatisfied with how you are managing your money, achieving financial health will be harder for you.
Knowing your values affects your finances through:
- Clarity in what success means to you, rather than what society and social media suggest.
- Confidence to make financial decisions with the certainty that they are aligned with what matters to you.
- Motivation increases when your goals reflect your values, as does your commitment to your goals.
- Satisfaction improves when your budget reflects what is important to you.
In the end, the greater your emotional and financial well-being, the better your financial health. Financial health isn’t just about the numbers, but how content you are with those numbers.
How Do Your Values Affect Your Finances?
The mistake many people make is thinking that financial management should be dealt with strictly by the numbers. This includes the step-by-step formulas that are sold to you as “how to be successful”. But the truth is that no matter what your income and savings are, if you are not aligned with your values, you will never find satisfaction within your finances.
Since your values and your finances are inseparable, it is fair to say that every dollar you spend or save reflects what you prioritize. As your financial decisions reflect your core beliefs, your budget becomes more than simply a plan. Your budget becomes a reflection of your identity. Your budget begins with cutting costs, but ends in creating a life that aligns with your true self.
Values & Financial Goals
Goals that are created and aligned with your values feel more meaningful, which makes them more fulfilling to pursue. On the other hand, when financial goals conflict with your values, it makes it harder to choose a direction to take. This makes it too easy to abandon goals that don’t feel significant to you personally.
- Determine What Feels Worthwhile – If you value freedom, you may want to set goals around building passive income, working remotely, or reducing debt. However, if you value community, your goals should be focused on supporting local organizations or creating a small business that helps to serve others.
- Help Guide Your Priorities – While climbing the corporate ladder may be what society wants, if you happen to value family, your goals may prioritize a flexible working schedule, or saving for a family vacation.
- Motivate Long-Term Goals – Financial goals that truly reflect who you are as a person will tap into your intrinsic motivation, making it much easier for you to act on your goals. As a result, you can push through any challenges that come up and stay committed.
- Help Set Boundaries – When you have financial goals that reflect your values, it becomes much easier to set boundaries. This means saying no to distractions, or even opportunities that don’t align. If you value simplicity, you are likely to say no to things that overcomplicate your life.
- Improve Overall Satisfaction – As your budget reflects your values, your emotional and financial satisfaction also increases.
Benefits of Identifying Your Core Values:
As with all aspects of self-improvement, improving your overall belief about your finances has pros and cons. I strongly believe that the benefits far outweigh any drawbacks.
Pros Of Identifying Your Values
- When you know what is truly important to you, you have improved financial clarity. You can direct money towards the areas that mean the most to you, and cut spending in categories that have become unnecessary.
- If you are managing your finances with a partner, healthy communication and identifying your values can reduce conflict and help promote a teamwork approach
- Simply aligning your spending with your values not only reduces stress but also increases financial well-being, which leads to overall satisfaction in your finances and life overall.
- When your financial goals are connected to your values, the goals feel more meaningful. This stronger emotional connection to your financial goals increases the likelihood that you’ll follow through and achieve the goals.
Cons Of Identifying Your Personal Values
- Realizing that your current spending habits don’t reflect your values is a hard truth, and it can be incredibly uncomfortable.
- Some difficult choices may need to be made as you prioritize one value and temporarily set aside another.
- Your individual values and decisions may not always align with family and friends, or even societal norms, which can create conflict with others.
Steps To Help You Identify Your Values
Now that you know how your values can affect your decision-making and finances, it’s time to identify your values. If you are serious about improving your financial health, this is a step you need to take. Remember to be honest with yourself, curious about why you feel a particular way, and be patient as you identify your values.
1 – Reflect On Moments Had Meaning
To start, think about the times within your life that you felt the most fulfilled, proud, and at peace.
What were you doing? Who was with you? Why do these moments resonate with you?
2 – Start Broad With Possible Values, then narrow them down
Use a broad list of values, and highlight the ones that mean something to you. Don’t think too much about it, just a quick yes or no.
Then look at the ones you’ve highlighted. Do any of them fit within the moments that had meaning in your life? Narrow your list down until you have about 5 core values. These are the values that you will return to repeatedly when making major life choices.
3 – Connect Values To Spending
Look at the last month or two of spending. How well did your discretionary spending reflect your values? Are you putting money towards what matters most to you, or do you need to readjust your spending?
4 – Set Financial Goals Based On Values
After you’ve reviewed your current spending, it is time to shape your financial goals with your 5 core values in mind.
For example, if your value is:
- Growth: Create a goal to set aside a fixed amount of money each month for personal development
- Family: Create a sinking fund goal for a family vacation, and every member of your family plans a piece of
- Security: Build a fully funded 6-month emergency fund
5 – Create A Value-Based Budget
To help you keep your values in sight and continue to implement them within your life, use them as categories within your budget. This means that you would have “Growth” in your budget, just like you would for groceries, pet supplies, and so on. Not only does it include each of your values, but it also creates a habit of intentional spending!
Keep Values First and Finances Second
When all is said and done, money is simply a tool, and how you use it is what gives it meaning. By identifying your values and honoring them in your spending decisions, your budget transforms from stressful to intentional. As you continue to align your spending with your beliefs, you gain confidence and peace of mind.
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