All budgeting methods share a common goal — to help you gain greater control over your finances. But that doesn’t mean any one will work for you. The values-based budget is one method that aligns spending with personal values while cutting in areas that don’t align with these values.
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Here are three signs a values-based budget is best for your money.
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What Is the Values-Based Budget?
A values-based budget allows you to prioritize things you find important in life. In his book “I Will Teach You To Be Rich,” personal finance guru Ramit Sethi talks about conscious spending and encourages people to spend on things they love — and then cut costs mercilessly on things they don’t. This is the central idea of the values-based budgeting method.
Abid Salahi, finance expert and co-founder of FinlyWealth, previously explained to GOBankingRates how this method works:
- Pinpoint your top 3-5 financial values (education, experiences, health, etc.).
- Allocate your budget based on these values.
- Cut in areas that don’t align with these values.
But the return on investment of a values-based budget isn’t always tangible, CNBC Select reported. Sometimes it’s more about gaining knowledge or being creative. It’s also important to distinguish between things you love buying and things that offer only instant gratification.
Signs the Values-Based Budgeting Method Is Best for Your Money
The values-based budget isn’t about sticking to a strict budget. Instead, it’s about avoiding mindless spending and making room in your finances for purchases you care about. However, this doesn’t work for every person or financial situation.
Here are some signs that a values-based budgeting method can work for you.
1. You live in an expensive area. This method is particularly effective in high-cost areas. For example, Salahi said that if you prioritize experiences over luxury housing, then you can free up more money by living in a small apartment and then putting that extra money toward travel or other experiences.
2. You’re financially secure but want more flexibility to enjoy life. If you’re living paycheck-to-paycheck, you may want to consider another budgeting method. Paying bills and saving for emergencies or retirement comes first. But if you’re financially secure — and want more freedom to live and spend on things that matter to you — then a values-based budget may be ideal.
3. You know what you value in life and want to manage your money accordingly. By managing your money around your values, you can save and spend more wisely. “If we make space for both values-based spending and values-based saving, you’ll find that people will actually save more intentionally and spend with more meaning,” Kara Stevens, author and owner of a personal finance blog, explained to Discover.
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This article originally appeared on GOBankingRates.com: 3 Signs a Values-Based Budget Is Best for Your Money
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