During this time of year, it’s incredibly beneficial to take a look at your finances and evaluate whether or not they’re bringing you joy.
We’re in the middle of a season that’s geared toward gratitude, and you can use that momentum to make sure your money is lining up with your values. There are several ways you can do this, and today I want to go over my favorites with you.
Value-Based Budgeting
The first place you should look to realign your money with your values is your budget. Where we’re spending our money is a clear indicator of what we prioritize in our day-to-day. To start this process, I recommend taking the time to do a little bit of introspection. What brings you joy? What things do you value most in life? If you’re struggling to define your values, start by taking a free values assessment like this one. Even if the results don’t perfectly reflect your values, it’s a good way to get the ball rolling.
Once you have a list of your values or specific parts of your life that make you happy, it’s time to look at your spending. If you currently have a budget that you stick to, that’s great! You can look at your existing budget. Don’t have a budget yet? Don’t worry! Pull up your bank and credit card statements to evaluate purchases for the last 1-3 months.
More often than not, people slide into convenience spending. In other words, they spend money on things that make life more convenient - even if those aren’t things that actually make them happy. A small example of this might be stopping for a fast-food breakfast every morning on your way to work. If you value health and enjoy spending time meal prepping, every time you hit the drive-thru, you’re spending in a way that doesn’t line up with your values.
When you look at your spending, think of items that don’t bring you joy. Is there a way you could replace these expenses with something that made you happier, or that reflected what was important to you?
For example, maybe you choose to spend money on a $10/month gym membership instead of the fast-food breakfast on your way to work. Then you block off time in your calendar to prepare smoothie packets or an easy grab-and-go breakfast every Sunday to pack on your way to the gym before work. This is a small example, but you can apply the same concept to bigger line items in your budget, as well.
Charitable Giving
Are you passionate about supporting organizations and causes that matter to you? The truth is that many charities and organizations rely on end-of-year giving to fund their various initiatives - because that’s when people feel most motivated to give. However, research has shown that monthly giving (or quarterly) can actually have a more consistent, positive impact.
Breaking your charitable giving into smaller, more frequent increments can also make it feel a little bit less intimidating. It can be tough to give a large lump-sum to your charity or home-church at the end of the year when holidays and travel may have taken over surplus cash flow you usually have available. Instead, think about adding charitable giving into your monthly budget to make it a routine part of your spending.
This is a fantastic way to align your money with your values in a consistent way, and can actually have a positive impact on how you view your money, and your general happiness. Knowing that you’re using a part of your budget each month to support causes you care about can actually make you feel more confident about your other spending decisions.
It reduces the need to overspend in other areas of your budget - because you’re satisfied with where your money is going. You can also donate to charity using tax-efficient vehicles, such as Donor-Advised Funds, to level up your financial life while still doing good with your wealth.
Of course, it’s still important to vet the different organizations you’re donating to. The last thing you want is to donate your money consistently, only to realize the charity you’ve been supporting is a scam or doesn’t utilize their donations for the causes they supposedly support. Before donating, run your charity through an organization like Charity Navigator to learn more about them.
SRI and Sustainable Investing
Socially Responsible Investing (SRI), or sustainable investing, is another way for you to align your wealth with your values. SRI (and other similar investing philosophies like ESG and Impact Investing) help investors focus on using their money in a way that makes a positive impact on the world around them.
Different socially responsible investing groups have made it possible to invest in companies that are making an impact or doing good or avoiding organizations that have controversial values and investments. In these scenarios, your portfolio would be built in a way that reflects your unique values, while still supporting your long-term investing goals.
Investing can feel complicated as it is, and thinking about investing in a socially responsible way may be completely overwhelming for you. If that’s the case, know that you can take it slow. Start by asking your advisor if socially responsible investing is an option for you, or if you’re DIY-ing your financial plan, look into different SRI funds that could still meet your portfolio goals.
Getting Started
Are you ready to get started aligning your money with your values? Follow these three easy, actionable tips to kick off your journey.
Actionable Tips:
Take a closer look at your budget. Is your spending lining up with the things that bring you joy?
Think about your charitable giving. Can you incorporate giving into your ongoing budget?
Consider how you’re investing your money. Is SRI right for you?