lightning bolt icon to show concept for quick lessons Quick Lesson

Trips to tacos: Value-based spending and aligning your money with the things that matter

  • Facebook
  • Twitter
  • LinkedIn
  • LinkedIn Copied link to Clipboard!

Many people hear the word “budgeting” and imagine endless spreadsheets and piles of receipts. However, creating a budget or spending plan doesn’t have to be a chore. Integrating your values can help you stay on track toward your financial goals and help make your spending more impactful.

Episode notes

In this episode, we are joined by Emma Protsik (Supervisor of Financial Coaching) and Sara Bickers (Community Educator Lead) and will cover:

  • How aligning your values with a spending plan can make budgeting more fun and meaningful.
  • How naming accounts and reframing money into “working hours” can help keep you on budget.
  • Using a percentile-based budgeting method and how automation can help.
  • How your values can shape your spending on needs, wants and savings.
  • Emma and Sara’s favorite value-based spending tips.

Transcript

Brent Sabati: ​[00:00:00] Welcome everyone to another episode of the Sound Cents Podcast. I'm your host, Brent Sabati and today I'm joined by Emma Protsik.

Emma Protsik: Hi, I'm Emma, supervisor of Financial Coaching at Ent Credit Union

Brent Sabati: and Sara Bickers

Sara Bickers: Hi everybody. I'm the community educator lead for the Northern region at Ent Credit Union.

Brent Sabati: And today we'll be talking about value-based spending.

Now, many may think about money and finances in terms of numbers, data, and its quantitative value. It can kind of seem boring if you're just thinking about it like a math equation. But money means different things to different [00:01:00] people, and I really think that value-based spending is a fascinating topic.

So Emma, can you give us a primer on what value-based spending is?

Emma Protsik: Absolutely Brent. So money is emotional. We all kind of know that, but whether you realize it or not, how you're spending your money is going to be a direct representation on what you value.

When you take out that card to make a purchase or get that cash out you're saying that whatever product or service you are purchasing matters to you and is important. For example, we may value travel, fashion, maybe different environmental causes. So it's really important for us to make sure there's room in our budget, in our spending plans for those things.

When you look at your money and kind of this lens of it's your values and that value-based spending, taking some time to identify your values allows you to notice certain spending habits that you have that aren't aligning with the things that matter most to you.

If you haven't really thought too much about your personal values, there's tons of different exercises [00:02:00] online that you can take. Choose from a list of words and figure out what matters most to you, so we highly recommend those. Brene Brown has an amazing one, I definitely recommend checking out, but there's lots of other resources out there.

But when we take some time to identify what matters to us, when we start seeing those behaviors that we've kind of picked up on, maybe it's certain habits and are spending that aren't aligning with it. So a personal example here, I realize I really value quality time with the people I love.

I like going on trips, going out to dinner, doing activities. When I took the time to look at my spending plan, keeping that value in mind, I realized I was spending a good portion of my income on personal shopping. Absolutely nothing's wrong with that, but again, I was taking away from things that I value. I was spending money on things that don't matter as much to me or make me as happy.

Brent Sabati: So Emma mentioned a lot about the different values you may have and why it's important to make sure that's aligned with your spending but one, it [00:03:00] can be kind of difficult to identify those values, and two, when you have identified them, , it might be a little difficult to take that next step and really implement that into your personal finances.

So Sarah, can you give us a few tips on what you can do to apply those values to your spending?

Sara Bickers: Absolutely, Brent. When we are talking about keeping our spending in alignment with our values, there are several tips that we like to share. One of those is nicknaming your accounts based off of some of your goals or some of your values.

So for example, if you're working toward building up a down payment on a house, then you can nickname your savings account for that down payment "down payment for house," and it is a lot harder to transfer money out of an account that you have an emotional connection to based off of those names, than it would be if it was just labeled something like "savings."

Because savings is general. It doesn't have that specific emotional tie. To something that you're working toward. And you can do [00:04:00] this with all of your accounts if you want to make sure your spending is in alignment with something you value on the regular and maybe you value food such as tacos. You can name your checking account tacos, so you keep that in mind every time you go to make a purchase.

So just making that connection between your emotions and your values and your actual accounts can really help you keep your spending in alignment with your values.

Another tip we like to share is specific, but it applies to a lot of people because a lot of people really value their time, and so rather than framing your purchases in a dollar amount, I like to recommend framing your purchases in hours worked.

So when you're looking at buying something, rather than saying, "oh, that's a hundred dollars," saying, "how many hours do I have to work to make that money?" And it helps you resist some impulse buying and stick to things that are really important to you when [00:05:00] making those purchases.

Brent Sabati: Those are really great tips.

And I wanna backtrack a little bit to the naming your different accounts. So I think people may have a tendency to go crazy with this if they really wanted to get deeply detailed into their budget and naming an account. So is there ever kind of a point of diminishing return as far as naming too many accounts, creating too many separate things like that and do you say that there's any negative side effects that could happen if someone is naming their account with something that may have a negative connotation?

Sara Bickers: I think it depends on the individual. I recommend figuring out what works for you. Obviously at some point they're gonna be too many accounts to keep track of, so finding something that is manageable, that's in keeping to the things that are really important to you will help you manage your spending in a way that works for you in ways that you are able to keep track of. It's hard to give a specific number because that number's going to be different from person to person.

Emma Protsik: Brent, I think when you're asking about any [00:06:00] negative feelings as far as naming your accounts again, it's all about relating it back to your values. So whether that is quality time or the tacos, definitely try to keep the verbiage positive and something that will motivate you.

Brent Sabati: So I love both of those tips and really the hours worked thing is a really interesting concept that I try to apply to my life, especially when I go out and eat things like fast food. I try to think, Hey, if I'm buying this meal at McDonald's, this is costing me how many hours of work when I could just eat at home.

So I think that's a really great tip to help save some money and just make sure you're prioritizing what you're actually purchasing.

 So far we've talked about value-based spending and it sounds really aspirational in a sense, and really positive on how you can have money impact your life. But when I traditionally think about budgeting, I feel like a lot of people have a negative connotation and see it as something that is a little bit more tedious or restrictive. So how would you say that balances with value-based spending?

Emma Protsik: That's a great question and one we get [00:07:00] a lot. I really do think it is a common misconception that budgeting does really mean restricting yourself from purchasing the things that you want. In reality, creating a budget or what we really like to call a spending plan is something that can really empower you to do things you want while still achieving your different financial goals, whether that's retirement or that house down payment.

Budgeting can be very overwhelming, especially if you haven't done it in the past or have something to work off of. But when we are looking at our spending and thinking about our values and our goals in mind, it can really turn into a positive thing.

Brent Sabati: So that's a really good point, Emma. I think budgeting in itself can be a fun exercise if you apply this value-based spending concept to it. You know, I typically dread having to look through my budget every month and see where I'm overspending and underspending. But I think it can be really fun, especially if you're doing it with a partner or a spouse to sit down and look at a budget and say, Hey, maybe next month we actually [00:08:00] underspent in one of our value categories so we have more money that we can do to do fun activities or the things we care about.

And I think that's a really positive and fun thing to look forward to every month, rather than having that end of the month dread of, oh no, I. $500 on McDonald's when I shouldn't have or something like that. So that's a, a really cool concept.

Emma Protsik: I think it is absolutely how you approach the situation and I will say it does get easier the more you do it. So make sure to give yourself grace if you are just starting off in your budgeting. .

Brent Sabati: So I know there's tons of ways people budget, and obviously it probably depends on what your own personal is and your preference.

So could you give a few tips to someone who maybe doesn't have a budget and how they can start off.

Sara Bickers: Absolutely Brent. If you don't know where to start with your budget, we typically recommend starting with a percentile budgeting method in combination with this values-based spending concept that we're discussing.

So the percentile budgeting [00:09:00] method is also known as the 50- 30- 20 method. And that means breaking your spending into three categories. So 50% of your take home pay, so that's your after tax pay toward needs. 30% towards wants and 20% towards savings. These percentages aren't absolute. If your needs make up more than 50% of your budget, that's totally okay. It's the idea of dividing your budget into those three categories and setting certain percentages for them.

Now, there are a few things that you want to consider when doing this. One is that looking at just one month of past expenses might not give you a whole picture of what your budget is. So when you're looking at your past expenses, we typically recommend you look at three months of income and expenses to try to figure out what the whole [00:10:00] picture of your budget looks like and get a holistic idea of what you're dealing with there.

So then you can set a monthly budget that's going to work for you considering how things might change from month to month. The other thing that I want to make sure you consider with this is that when you are looking at this budget, you might notice, especially while you're considering your values, that you're spending on some things that might not be that important to you. And that's a great area to start saying, "okay, I'm spending on this thing, it's not that important to me, it's not part of my values." That's definitely some room that I can put towards savings.

The last consideration I want to talk about here with this percentile budgeting method. Is that highlight of the savings piece. So once you look at your income and your expenses and figure out what your needs are and make sure you're covering those, the next step is going to be prioritizing [00:11:00] savings. So figuring out, okay, this is how much I'm going to put towards savings.

This is how much I need to work toward the goals I have and the things that are important and automate that savings piece if you can go ahead and set it up to transfer, and then the rest that's left over, that can be kind of your wants category. That's the money that you have that is flexible, that you can spend on the things that you want.

So needs covered, then the savings piece and then that wants category's typically the most flexible. Now, if savings seems overwhelming, start small. It can be $10, it can be $2. Whatever you can to build that habit of paying yourself first will help. And then you can build that up as you go along. So just prioritizing savings in that will really help you work toward the goals that you have.

Emma Protsik: I always like to say treat your [00:12:00] savings as just another bill. I try to make that the first thing, the first transfer I make when I do receive my paycheck. If that is something that you struggle with, that's where automation is your friend. So set up an automatic transfer whenever your pay frequency is that way, it's outta sight and outta mind.

Brent Sabati: So if someone is implementing one of these percentile based budgets, how would you say that applies to value-based spending In the sense of should they only try to apply values to their wants categories, or can it spill out into needs and saving?

Emma Protsik: I think it's definitely both.

Again, I value quality time with my friends, so part of what I save for are fun trips, definitely not a need. A lot of people I think value things such as security, so that can look like purchasing a home for your family or college in the future. So it can definitely be both.

Sara Bickers: Yeah, just to ditto on that, Emma. When you are thinking about these three different categories, the needs and the [00:13:00] wants and the savings, your values absolutely do resonate through all of them. When you're thinking about your needs, obviously there are things that we all need to cover, like food, like housing, depending on your situation, transportation. Those are absolutely our needs and the things that we value can kind of shape what emphasis we put onto what those needs look like. So yes, I absolutely need food. But my values for how food looks might impact how much I put toward my budget for that category and where I spend my money based off of whether or not I really value the experience of eating out and like trying new places or whether or not, that's not something , that's that important to me.

And I'm certainly just, okay, having a peanut butter and jelly sandwich every day. Food is a need, but [00:14:00] your values can shape what that need looks like.

Brent Sabati: So just to add an additional point to this, I think, one example that comes up for myself personally is housing expense. So I feel like when it comes to housing, whether you're renting or you're paying for a mortgage, there's a lot of rules that we hear in the finance world about how much you should be spending for your housing allowance.

So if something you value is, let's say just your quality time at home, you like to be very comfortable, you like to have, your little comfort pieces and furniture and things like that, would you say it's worth potentially increasing that category, to maybe, you know, 60% needs in that housing expense if that's something that you really value?

Emma Protsik: Absolutely. Like Sarah mentioned, you are going to find lots of guidelines out there, lots of people that would recommend a certain percentage for certain expenses or even just kind of that simple 50, 30, 20 method that we follow here.

Every person is going to look different. No one's [00:15:00] budget is going to look the same. And again, if you value something and it matters to you, you're not wasting money on it by any means. You may need to cut back on some of those other categories, but again, that's okay. I think that a lot of us would rather have money going towards things we enjoy than things we don't as much.

Brent Sabati: So what are some resources that a person can use if they're trying to implement a value-based spending plan?

Sara Bickers: So one of the key resources that we'd recommend is money Insight. So if you're looking for any sort of budgeting app, if you have one already, obviously find the one that works for you.

One that's easy to access and one that's familiar, but if you don't have a budgeting app and you need a recommendation, money insight or money insight lite is available to members and non-members, and it is a great place to pull together all of your different financial institutions and [00:16:00] look at your overall income, your overall spending, and it has some really cool features. So it will go ahead and auto categorize your spending based off of previous patterns and set estimated budgets based off of how you've been spending in the past.

And you can go in and set those yourself. And so you can set your budget you have for each category and say, "Hey, here's the limit for my transportation, for my food," and it will change colors as you approach that limit. So it'll start off green when you haven't spent that much in that category. As you approach the limit that you've set, it'll turn yellow and when you reach it, it will turn red.

So those color changes really help visualize your spending and help you keep on the track that you've set for yourself.

Emma Protsik: I absolutely love Money Insight, Sara. I just love the automation behind it. It's really that mindless money management, and I love that it lives [00:17:00] right in my Ent app, too. Just makes it so much easier.

There are some other kind of tools that you can use. Definitely do research and look into different resources. Our education center has a ton of different articles and quizzes if you are more of that self-learner. If you were looking for a little bit more guidance though, I would really recommend meeting with one of Ent's financial coaches.

We are in select service centers all across the front range and our coaches are trained in this. They're there to help you look at your budget overall, see where there's rooms for improvement, and kind of see that big picture there so they can help you out with things such as budgeting and savings, what we talked about today.

Also, things like credit and debt repayment. But our coaches really are there to help bounce ideas off of if that's something you're looking for and it is always non-judgmental.

Brent Sabati: And if anyone is looking to use any of these resources that both Emma and Sara mentioned, I'll link to those in the show notes. And those are all free resources that are available to members and non-members alike.[00:18:00]

So as we wrap up here, what are some of the major takeaways you have for someone who is really looking to implement value-based spending or trying to revamp their budget?

Sara Bickers: So, I think we mentioned this earlier, but one thing we really like to reiterate is to give yourself grace. It takes time to figure out what your values are and what sort of budget is going to work for you. And as we move forward with life, things change and they can change regularly and quickly.

So your budget is not a one time thing that you sit down and say "forever this is my budget," and "forever these are my values." As you move forward with life, those things might change over time. So it's a constant thing that you're working on and revising to make sure your spending is in alignment with your values and your budget is something that is going to work for you.

The other things to consider here is that we all have cognitive biases that [00:19:00] can impact how we view our money and it kind of take away from some of the things we're working on here. So a lot of it might be acknowledging what is going on and how we view money and saying, okay, these are the goals I really have.

These are the things I'm really working toward. And acknowledging just where you're at in your financial journey to work toward the changes that you're trying to make. And as you're doing that kind of gamifying it can help, come up with savings games and other savings strategies that can help you along your way.

One of my favorites is just wait a day before purchasing something. Wait 24 hours. If you see something you like. Sleep on it and maybe the next day you realize it's not something that is that important to you. It's not something you thought you wanted as much. And that can kind of reduce impulse spending and help you make sure your purchases are [00:20:00] things that are important and things that align with your values.

Emma Protsik: For me, I think it is reframing just how you view budgeting in general. Budgeting is not meant to be restrictive, even though it might feel like that.

Of course, budgeting means there is some discipline involved. But my number one tip I would say is make sure you are budgeting for the fun stuff. Creating a budget, you wanna make sure it's sustainable, one that you can maintain.

You can still do things you want and purchase things that you value while still achieving your financial goals. It's again, just the prioritization of that. Make sure you're depositing into savings, working on paying down debt and covering all of your needs.

Restricting yourself too much will make it extremely difficult to maintain that spending plan in the long term.

Brent Sabati: So I think both of those are really great best practices and something that I'll definitely take away with me as I move forward and try to implement more value-based spending and [00:21:00] spending plans into my finances. So as we wrap up, I want to ask one more kind of fun question. Now, Emma, you mentioned that one of your value categories is quality time.

So for the both of you, what is a purchase you made recently that falls into one of your value categories that's really memorable?

Emma Protsik: For me, quality time really does matter. A purchase we made recently, the holidays are coming up at least when we're recording this.

So my fiance is a big skier, so we saved up to get a nice Airbnb in Breckenridge, get some of our friends out, he can ski and we can celebrate the New Year's together.

Sara Bickers: Oh, that sounds amazing, Emma. That's really exciting. For me, one of my values is adventure and trying new things. And while this isn't like a major, super memorable purchase, I like to leave room in my budget for trying new restaurants.

Eating out is getting increasingly expensive. So I cook as much as I can, but when I do go out to eat, I try to make sure the place that I am [00:22:00] visiting is somewhere I've never been before. And so rather than having a restaurant that I frequent every time I try to pick somewhere new so that I'm exploring the new adventurous restaurants around where I live.

And really spending on the values that I have. So it's not like one big thing, but every now and then it's something small that I do to stick to my values.

Emma Protsik: I'll need some restaurant recommendations from you.

Sara Bickers: Oh, I've got plenty .

Brent Sabati: Thank you so much Emma and Sarah for sharing some of those purchases and those value categories that you made and talking today with us about value-based spending and how you can use money to make life more meaningful.

Emma Protsik: Thank you, Brent.

Sara Bickers: Thank you Brent .

Brent Sabati: if you've enjoyed the podcast, make sure you're subscribed so you don't miss any new episodes, and we'd love to hear from you. So leave us a review on your podcast platform of choice. Thanks for listening, and we'll catch you on the next episode of the Sound Cents podcast. [00:23:00]

PLEASE NOTE: The information presented in this episode is intended to be used for informational purposes only and should not be considered advice. Consult a financial, tax or legal professional to see if the information provided in this episode is suitable for your situation.  

 

Information stated is current as of the time of recording and may be subject to change in the future. 

 

Third party products and services mentioned in the podcast are done so for informational purposes only and should not be considered endorsements or affiliations unless stated otherwise. 

 

Any opinions of guests or third parties on the podcast are strictly their own and do not represent Ent Credit Union.  

 

Ent Credit Union is insured by the NCUA and is an equal housing opportunity lender. Visit Ent.com for more information.