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Mastering Your Budget: How to Allocate Money Based on Core Values

Updated: Jan 19

Are you ready to dive into the world of budgeting like a true pro? Since your path to financial success is as unique as you are, why settle for a boring a$$ budget when you can rock out with your finances out?! Let's go...


a rooster wearing a gold necklace adorned with a large dollar sign

Setting the Stage

Budgeting doesn't mean stifling your fabulous lifestyle; it's all about aligning your spending with your values. So, pour yourself a glass of your favorite wine, put on your confidence-boosting power anthem, and let's write this thing out.


Developing Your Budget (aka Spending Plan)

Step 1

First and foremost, it's time to dive into those things you can't live without. These necessities are the financial commitments and obligations that are an integral part of your day-to-day life. They encompass your regular monthly expenses such as rent or mortgage payments, utility bills, insurance premiums, debts owed, and other crucial costs that keep your life running smoothly. While they might seem like an annoyance, consider a reframe-- think of them as the non-negotiable elements that grant you the comfort, safety, and structure to pursue your aspirations. Effective financial planning acknowledges and incorporates these obligations into your budget as the top priority.


It's time to get out your paper or open up a spreadsheet and write each of these down:

  • Mortgage and/or Rent

  • Insurance (home or renter's, vehicle and/or RV, medical, long-term and/or short-term disability, life, etc.)

  • Utilities (feel free to separate this category into each utility if that's easier)

  • Groceries

  • Transportation (car payment, gas, public transit, etc.)

  • Debt Payments (credit card minimums, student loans, personal loans, etc.)

Go back and look at your bank account to document how much you spend on these. And please... for the love of all things holy, don't just guess. Almost 100% of the time, people guess these numbers incorrectly. Okay, I made that stat up, but anecdotally it's true. We're human and not good at guessing how much we've spent on things. No blame. Just reality.


Step 2

Next, we're talking about savings.

You may have seen the phrase "Pay Yourself First" floating about; this is figuring out how much you're putting toward your future self.


This includes...

  • Retirement savings (if you need clarification on how much to save for retirement, head to this blog)

  • Emergency savings (rule of thumb here is to have at least 3-6 months' worth of savings stashed away)

  • Getting one month ahead (saving one month of income so it can be used for the next month-- versus spending as you earn)

  • Sinking funds (this is one of the best ways to save for vehicle repairs, vacations, holiday gifts, etc.)

There is no set number or percentage of how much you should put toward each category. You have to determine your goals and go from there.


So far, you have this formula:

Monthly Inflow - Obligations - Savings

Now what...?


Step 3

We're about to dive into the art of allocating discretionary spending in a way that aligns with your core values. In a world that constantly bombards us with tempting ways to part with our cash, it's essential that what you spend your money on reflects what truly matters to you. Get ready to make your spending decisions with purpose and precision!

First and foremost, define your core values. What matters most to you? Is it travel, personal development, family, or giving back to the community? Pull that notebook or spreadsheet back out and make a list of your core values. These will serve as the guiding stars for your spending decisions. And, if you can't come up with values off the cuff, Brené Brown has an excellent list to help you get started. (If you google the "dare to lead list of values," you should find it easily.)

a green piece of paper ripped in half revealing the words 'core values'

Secondly, it is time to prioritize those values. This step will help you make decisions when you're faced with deciding if you should spend money on this or that.

Let's say there's something on your radar you've been eyeing up.

Ask yourself:

"Do I have money in the discretionary bucket of funds to cover it?"

If yes, move to this question...

"Does this item align with my values?"


If yes, move to this question...

"Do I want this now? Or is there another higher priority value item I prefer?"


If yes, spend that money guilt-free!

If there's a higher priority value item, repeat the questions and see where you land


Remember, in a world where consumerism often dictates our spending, allocating discretionary funds based on your values is your ticket to a more meaningful and intentional financial life. So, go ahead and spend like you mean it.

So far, you have this formula:

Monthly Inflow - Obligations - Savings - Discretionary Spending

What happens if money is left over after you go through this process? That's the FUN part! You get to decide if you want to pay down more debt, beef up your savings, or if you're going to have more discretionary money to play with.


The Zero Dollar Philosophy

My recommendation is to always have your formula equal zero, like this:

Monthly Inflow - Obligations - Savings - Discretionary Spending = Zero

a chalkboard filled with math equations with the words, Math Made Easy overtop

This way, you don't leave extra funds sitting around unaccounted for. The slogan is-- "Give every dollar a job."

To clarify, this does not mean running your checking account to zero each month. If you're not in the "One Month Ahead" phase yet, leave a buffer in your checking account, such as $1000; this way, you won't get any overdraft fees. There is no need to contribute more than we already do to the banking industry. ❌


The Bottom Line

Unconventional earners, you're pioneers of your destiny, crafting your path with the threads of whimsy and determination. As you sculpt your budget plan, remember that it's a reflection of your dreams, ambitions, and distinctive lifestyle. Embrace the numbers with as much fervor as you embrace your lifestyle.


Here's to you,

Melissa Mittelstaedt

Money Coach | Accredited Financial Counselor®

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