I write a lot about value-based spending. I’ve included it in several blog posts and it’s an entire chapter in my book Cash Uncomplicated. Value-based spending is one of the key financial principles I live my life by, and something I believe can benefit everyone.
Related: How Value-Based Spending Can Change Your Life
This blog post is designed to have you take a step back and look at your spending over the past couple years. Then ask yourself the question: Are your financial values aligned with your life values?
If you ask most people, they’ll tell you the things they value most in life are some combination of family, friends, experiences, health, faith and security. And I believe that people truly have good intentions in upholding these values. Life happens though and it’s easy to quickly lose sight of our values and goals.
Although our intentions are good, our financial behaviors do not support these values. A recent study by WalletHub that found Americans began 2020 in more than one trillion of credit card debt. The same study indicated that the average credit card debt per household was slightly over $8,000.
The average car payment for a new car in the United States is $563 per month, with the average term 70 months according to a recent article on Lendingtree.com. That’s 70 months, or almost six years of $563 car payments. For a family with two cars, multiply that number by two and you’ve got $1,126 per month!
Related: How to Never Make a Car Payment Again
Quite simply, our financial behaviors are out of alignment with our life values. Credit card debt and vehicle loans are consumer debt. I suppose the argument could be made that these debts actually support the bigger life values like family, friends, and experiences.
If you don’t have the funds, put the family vacation on the credit card because this is a once in lifetime trip—and your kids are starting to get older. I hear counter points like this, and there may be some merit to them. I just don’t agree with them.
I see consumer debt as suffocating to people’s core life values. It’s a little harder to enjoy quality family time knowing you’ve got a credit card balance of over $8,000, and two car payments totaling over $1,000. Not to mention the mortgage or rent, student loans, and other miscellaneous expenses.
Money is the number one thing couples argue about according to this article in Business Insider. Money arguments are also frequently cited as one of the top causes of divorce. Could it be that the way we’re spending money is so out of alignment with our core values that it’s contributing to relationship problems?
Related: How to Talk With Your Spouse or Significant Other About Money—and Avoid Arguing
I think there’s something to that question. Being in consumer debt is stressful. I know because I’ve been there. It’s a very uncomfortable feeling knowing that a good portion of your next paycheck is going straight to the credit card company and the car loan. It’s hard to get ahead financially like this. It feels like you’re just working to pay yesterday’s bills. Not very satisfying if you ask me.
I’m not a relationship expert, but I believe that most people get married or involved in a serious relationship for good reasons. Most people want the same thing—another person who loves them, quality time together, shared experiences, and more. I don’t believe anyone comes into a relationship saying they want to argue about money and other things.
When one or both people get so far away from their core values, it’s easy to start blaming the other person and engage in arguments about money. And most of us are starting as beginners—very few people were taught about personal finance at school or in the home. We’re kind of learning on the fly and it’s easy to get frustrated with ourselves and our partner.
What To Do About It
I purposefully wrote about life values in the very first chapter of my book for good reason. I believe a strong understanding of our values will guide us in our behavior and choices. When we are keenly aware of what we value and think about it daily, we are likely to make choices based on those values. It’s when we lose sight of those values that we start to have problems.
Writing down our values is a great first step. When we physically write something down, it stays in the forefront of our mind. There is something very powerful about the act of writing something down. It’s something you created and took the time to write down. It’s easy to take ownership of something you create and value enough to write down.
The very act of writing something down helps create clarity. Often, as people are writing down their values, they realize that what they are currently doing with their lives does not align with their values. Once that realization is made, it’s a cue to change behavior.
In my appearance on Talking Wealth: Episode 88, Start at 39:00 of Episode, the host and I talk about an example of someone who values family, friends, and experiences but works late every night to pay for an expensive car and consumer items. Many people in this situation don’t even recognize what they are doing. It often takes writing it down and reflecting on your daily behaviors to identify the incongruent behavior.
In addition to writing down your values, it also really helps to track your spending. This can be done via an app like Mint, writing it down on your own form, or using the spending tracker I created. In my spending tracker, I also included values, so that you’re identifying not only what you spend on, but also if you value that item. Spending tracker is available as a free bonus for signing up for my email list on the homepage.
Combining the spending tracker with value assessment is an extra layer of recognition that will help a lot of people identify what they value. If you find at the end of the month that you have several items you spent money on that are not necessities, and that you don’t value‑you’re much more likely to adjust those spending habits after seeing it in writing or print. Nobody wants to have a laundry list of items they don’t need or value. No matter how much money you have, a list like that feels wasteful.
Conclusion
Just like a checkup at the doctor or dentist, it’s important to checkup on your personal finances. It’s easy to let the months and years go by and lose track of what you’re spending your hard-earned money on. We work hard and get focused on other things. As a result, our spending habits can get lost in the shuffle. Periodically reevaluating our finances helps get us back on track and make any necessary corrections.
Think about an airplane traveling from San Francisco to Miami. Even a small shift in the direction of the plane can cause it to end up somewhere other than Miami, like Charlotte or Atlanta. Our personal finances are just the same; even a series of small changes in our spending habits can cause our financial situation to drift way off course. Someone targeting retirement at age 55 might end up not meeting that goal until 65 or 70. A simple checkup and subsequent adjustments will help keep someone like this on track.
