Budgeting 2.0: How to Align Your Money with Your Values

Budget [buhj-it] noun
1. an estimate, often itemized, of expected income and expense for a given period in the future
2. an average adult’s worst headache

Before you pull the plug on this article, please know that I am not going to tell you to stop buying your daily cup of coffee. Budgeting isn’t about cutting expenses on the things you love; it is about evaluating and realigning your spending and savings with your personal values. Personal finance is personal, so don’t feel the need to compare your financial goals and progress with others. The destination is different for everyone.

The best way to begin your path to financial independence is by assessing your current financial landscape. You must know where you are before determining where to go (and how to get there). This exercise of reviewing how money flows in and out of your accounts can verify if your spending and savings accurately align with your current values. Budgeting on purpose takes a little bit of concentrated work up front, but it makes future cash flow and investment decisions less daunting.

Take a deep breath; we’ll get through this and out the other side with a sense of clarity and ease – then you can go get your coffee.

Step 1

Log on to your banking and credit card websites and export the last six months of expenses, plus any expenses paid annually (property taxes, life insurance premiums, etc.). These can usually be exported as a spreadsheet (Excel/CSV). Open this file with Excel or a similar program.

Step 2

Categorize your expenses by type and across three columns – non-discretionary (needs), discretionary (wants), and savings. Include your expenses that were deducted from your gross income (listed on your pay stub), including taxes, insurance, and retirement savings – these are often neglected in the budgeting process. Itemizing the categories further (i.e., splitting ‘insurance’ into home, auto, life, health, disability, etc.) will also provide a better result for this exercise.

Here are some broad category examples to start:

Non-Discretionary (Needs)

  • Taxes
  • Mortgage/Rent
  • Transportation
  • Debt Payments
  • Auto/Home Maintenance
  • Gasoline
  • Groceries
  • Insurance
  • Utilities
  • Pets

Discretionary (Wants)

  • Clothing
  • Eating/Drinking Out
  • Entertainment
  • Personal Care (Hair/Gym, etc)
  • Shopping
  • Gifts
  • Travel


  • Emergency Fund
  • Short-Term
  • 401(k)
  • 403(b)
  • 457
  • IRA
  • HSA
  • ESPP
  • 529

Step 3

Average your expenses (divide by 6) to get an idea of how much each category costs per month.

Combine your three columns (needs, wants, savings) into one long list of expenses, and sort them by dollar amount ($), largest to smallest. This list reveals how much you spend on each category; housing, taxes, and transportation will likely top this list.

Step 4

Copy & paste a second list and sort them again, but this time by how much ‘subjective value’ each category provides. For example – if you spend money ‘eating out’ but don’t enjoy it as much as cooking and eating at home, rank that expense lower than the ‘groceries’ expense. Keep in mind that value doesn’t just have to mean ‘things that bring temporary happiness.’ For example, I highly value my term life insurance expense since it provides peace of mind. You may place a high value on travel, charitable giving, and yes – even your favorite cup of coffee!

Step 5

Compare the lists side-by-side. The expenses that have the most significant misalignment between dollar amount and value should be evaluated first, finding ways to reduce the expenses that don’t provide value and channel those dollars to the expenses that do.

A commonly misaligned expense is cable television – is it possible that the cost could be reduced without sacrificing value? Is there an alternative?

Ask these questions for each of your expenses, and start taking action to bring them into better alignment. I hope this exercise is helpful to you and provides clarity as you continue your journey to (and through) financial independence!

For extra fun, if you are married – try this exercise with your spouse, but separately. Discuss your results and ask/learn how to support their unique values with your spending and saving. *hug*

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