If you’re trying to save money, you’ve probably tried your hand at the classic 50/30/20 budget. The problem with this type of budget, however, is that it locks you into rigid spending ratios that may not make sense for your lifestyle. Someone who’s focused on aggressive debt payoff should probably allocate much more than 20% to debt payoff, for example. Percentage budgets also don’t lend themselves well to life changes: Getting married, having children, and getting a raise at work can all throw off a rigid budgeting approach.
How to Create a Budget Using the Values Budget | Values Budget Explained
But with values-based budgeting, you can create a budget that makes sense for you and your needs. You allocate your money based on what’s most important to you, rather than following a rigid percentage system. Whether it’s a vacation, a fancy new kitchen gadget, or your retirement, you can designate how much of your paycheck goes toward it each month and build around it while sticking to your spending and saving goals.
When it comes to personal budgeting, most advice revolves around saving specific percentages of your income, such as 50% for necessities, 30% for wants, and 20% for savings and debt. While this type of rigid budgeting plan offers a formulaic approach, it often doesn’t align with an individual’s unique goals and values. That’s why values-based budgeting is a more effective system for many people.
With value-based budgeting, you prioritize your spending based on what’s most important to you. If travel is a top priority, you can allocate more of your income to a vacation fund. Once you have kids, you can put more toward a college savings account. This flexibility allows your budget to adapt as your personal values and financial goals change over time. Here’s how to get started:
