A family of four are walking happily through a grassy field on a spring evening. They are holding hands and enjoying nature.

What is values-based budgeting and how can I start doing it?

Reflect on your life for a moment.

What is most important to you in your life?

What are your values?

Do those values align with your actions and spending habits?

While money is helpful in leading a stress-free life, it is also important that the way you spend your money align with what you value and what’s important to you. You can often learn a lot about a person’s values based on where they spend their money. So, does your current budget align with your values?

The first step to creating a values-based budget is understanding where your money is going today. You can use a budgeting app, electronic spreadsheet or pen and paper to track everything you spend.

Be sure to track every dollar spent from monthly utility bills down to vending machine purchases. Once you have an accurate understanding of your current expenses, you can properly allocate your money in a manner that lines up with your goals.

Speaking of goals, think about those for a moment:

Where do you see yourself and your family in five, ten or twenty years?

Do your spending habits align with the person you want to be?

What matters most to you in life?

Is what you are doing with your money today getting you closer to those goals?

At the end of the month, look through your list of expenses and put a checkmark next to everything that you feel aligns with your values. Also note any categories where you were surprised by the amount you spent.

For example, maybe you’ll notice you spent a lot of money eating fast food for lunch and had no money left over to pay for life insurance to protect your family. This may help you realize that packing a lunch will allow you to meet your goals of making sure your family will be protected if anything happens to you.

Also read: Procrastination solutions: Getting started with life insurance

Small changes make a big difference. Five or ten dollars per day for lunch adds up to $1,300-$2,600 per year! I am sure you could think of a few things you would like to do with that much money!

Once you’ve tracked your spending and determined if your expenses align with your goals, take some time to think about how you can change your spending habits.

What did you waste money on last month? Which items were worthwhile?

It may be important to have a smartphone, but do you really need the latest technology?

You also may enjoy television, but do you even watch all of the channels? Could you stream your favorite shows instead?

Also read: Life insurance: What’s in it for me while I’m still alive?

Some common areas to reduce expenses include eliminating cable television, using a budget cell phone carrier, waiting longer to upgrade smartphones, carpooling, ride sharing, public transportation, cooking more meals at home and planning meals around which items are on sale at the store.

Use a budget spreadsheet or talk with a personal financial coach at Foresters Everyday Money to brainstorm how you could reallocate your money to best meet your short-term and long-term goals. Changing small habits over time can lead to better financial decisions and improved relationships!

Also read: 5 Tips for your first meeting with a potential life insurance agent or advisor

415533 CAN/US (08/17)

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Michelle Budzien

Michelle Budzien is an Accredited Financial Counselor for Foresters Everyday Money, providing unbiased financial coaching and education with the goal of improving the financial well-being of Foresters members. Michelle enjoys writing about all aspects of personal finance such as budgeting tips and tools, debt management, understanding credit, analyzing future needs, and industry trends.