Do your finances align with your values? Is your spending line aligned with your goals? You don’t know?
You should figure it out to be both emotionally and financially happy.
How to know whether or not your finances are aligned with your values
Here’s the checklist:
- Write down the things that are most important for you or what you want in life.
- Analyze your spending records for past 1 or 2 years.
Now, compare the 2 lists and strike off the items that are there in the second list but not in the first.
Are there too many?
If yes, then you need to find out where you need to cut down and on what categories you need to spend.
Think and set goals that represent your values
If you feel the value, you need to set goals aligned to your values.
Focus on 4 main areas to determine your financial health:
- Credit score
- Net worth
- Long-term savings
- Short-term savings
On its basis, you need to set goals to achieve them.
For example, if you want to build an emergency fund, set a goal and write it down:
- How much you want to have in that account
- By which date you want to save that amount
- How much you want to contribute to the fund every month/week/quarter, etc.
Likewise, set goals for all the things you want to achieve for your future financial health.
Budget - Do you know it reflects your values too?
If you are planning a budget and following it, you may be successful in saving a certain amount every month. You may also adjust your budget with the change in your financial situation and goals.
Now, if you apply the concept that your budget will follow your values, automatically you might have to change certain things in your budget; and that will ultimately help you improve your financial health and you’ll be happy, too.
Now, how can you plan your budget aligned to your values?
Analyze how many times you ate out in a week/month and how much you paid in total. After analyzing, you might feel that you could have saved a portion of it, which you value more - your savings.
This doesn’t mean that you won’t go out ever. But, you’ll go out to places which you really value, instead of eating out every now and then. You will also spend more family time during the weekends preparing healthy meals.
Emotional audit for spending - Can it really help?
Sounds interesting! Isn’t it?
No, you don’t have to be good in maths or philosophy or psychology to conduct an emotional audit.
All you have to do is analyze your expenses keeping in mind your values, which you really treasure. It will surely help your finances align with your values.
What you did while planning your budget in a new way, here, you take a step further.
Whenever you spend on something, write down how you felt - Good, Bad, Impulsive, or Necessary.
Continue doing this for a month, and you’ll find a pattern in your spending habit. Now, just as you did before comparing between the 2 lists, here strike out items that don’t align with your values. Check out how many are left.
This exercise will open your eyes about your spending habit. If your spending gets aligned with your values, you’ll be happy both financially and emotionally.
5 Ways you can align your values with your finances
Now comes the time of major action; follow these tips:
1 Check your account statements:
Keep a note of all the financial transactions in your checkbook. For example, cash withdrawals, debit purchases, reimbursements, rewards (if any), etc. along with your credit transactions.
2 Calculate your net worth
You need to have a clear understanding of your net worth so that you can work towards increasing it as per your financial goals.
3 Take out everything from your wallet
You need to do this at least once a month. Take out everything from your wallet; everything means everything, not a single thing should be there.
Now, recycle any old paper receipts you no longer require; make sure you won’t return or exchange those things. Don’t put back the store cards you haven’t used in past 3 or 6 months. The judgment depends on you since you may have the habit of visiting a store twice or thrice a year during the discount period.
Keep only those things which you really need.
Opportunity to spend more - buy a new wallet ;)
4 List your needs and wants
Differentiate between your needs and wants clearly.
Follow this principle:
Needs = All that sustains you
Wants = All that entertains you
List all your expenses and estimate the cost of each need and want. Remember, you need to give priority to your needs first, and wants should align with your values you’ve set for yourself.
5 Create a calendar for expenses
Am I serious? Yes, I am, believe me.
This will include, occasions like anniversaries and birthdays, maintenance expenses like car repair, home repair, etc. along with other occasional expenses.
To end the article, 2 important suggestions to be happy that you’re aligning your finances with your values. Listen to money motivational audios and videos to stay motivated and not to let you distract from your mission. And, if you feel the need, consult a financial advisor - a money coach, as I prefer to refer. An advisor can help you align your financial moves as per your lifestyle and dreams you want to achieve.