A few years ago, I had an aha moment in my finances. I was in a decent place; I paid off $74,000 in credit cards, student loans and other bills and was debt-free except for my mortgage. I was also coaching friends and family in their finances. But there was something I hadn’t realized about my own relationship with money until it hit me — I had a scarcity mindset
It's what I was exposed to growing up — sometimes having enough, sometimes not having enough — always barely getting by. So, my default is to approach money from a place of scarcity. Even when I started improving my finances, I continued to handle my money in a way that there was always just enough — rather than a surplus.
Maybe you can relate. When you think about your financial situation, do you focus on not having enough? Do you think more about what you need to eliminate from your budget than what you want to put into it? Do your habits land you in the same place no matter how much money you have?
Shifting from scarcity to abundance
When I discovered that I approached my finances from a perspective of limit and scarcity, I started shifting my mindset around my spending habits. Rather than focusing on what I needed to eliminate and cut back, I identified what I value and want to prioritize. I also recognized what wasn’t important to me and could let go.
In other words, I started using my values as a filter for my spending.
Taking a “value-based” approach helped me think about my finances differently. Instead of "cutting back," I was "making room." Instead of doing without, I was prioritizing. Instead of giving in to every impulse to buy, I was spending purposefully. I managed my money from a perspective of contentment, peace and abundance rather than overwhelm, worry and lack.
When I coach clients through budgeting, I first walk them through the principle of value-based spending. And whenever I notice my spending habits are off-course, I revisit it.
4 steps to value-based spending
Step 1. First, identify what you value. What is important enough to you that you're willing to give it your time, attention and money? Another way to answer this is to think about what you want to prioritize. What do you want more of in your life?
Some things might immediately come to mind. For example, you may quickly identify that you value relationships, career and health. Go deeper; adventure, security and community may also be important to you. Write down everything you’ve thought of. This is your "value list."
Some things might immediately come to mind. For example, you may quickly identify that you value relationships, career and health. Go deeper; adventure, security and community may also be important to you. Write down everything you’ve thought of. This is your "value list."
Step 2. Next, identify what you don't value. This may seem odd, but reflecting on what’s unimportant will help you address your spending habits. So, similar to the questions above, what isn’t a priority for you? What are you okay with not directing your time, attention and money to? What do you want less of in your life?
For example, having the latest technology is not a priority for me. I would rather put my dollars towards an experience, vacation, quality clothing or savings.
So, think about the things that aren’t a priority for you. It could be the car you drive, clothing or eating out. Write them down. This is your "don't value list.”
You should have two lists now: things you value and items you don't. By the way, there's no right or wrong answer here, sis. What's on your "value list" could be on your friend's "don't value" list. This is personal and unique to you.
Step 3. The next step is to assess your expenses and see whether you spend according to your values.
Start with your “don’t value list.” Review each item to see if you’re spending money on non-priorities. If you identify several items or you dish out a significant amount of money on something on this list, you're spending outside your values.
Once you've gone through your list and identified if you're spending money on things you don't value, decide what expenses you want to let go of or minimize.
For example, if you don’t value watching TV but pay for three streaming services, perhaps you can adjust that. But rather than reducing expenses from a scarcity perspective, you’re doing it purposefully. It's not about doing without; it's about being intentional, prioritizing your resources and making room for the things you value. It’s like decluttering your spending.
Step 4. Now, it’s time to look at your value list. What's on the list that isn't getting your attention, time and dollars? What’s on the list that you want to increase? What do you want more of?
Go through each item on your value list to see what you want to prioritize or expand.
One coaching client, a 54-year-old social worker in New Haven, Conn., scrutinized her budget with this approach and was surprised to discover she was spending over $400 a month on a premium cable package and other services she didn’t use or want. Yet, she was contributing less than she wished towards retirement.
She chose to trim her plans to the basic packages and redirected the savings toward her 401(k). Knowing she was addressing her sense of security — a top value — made the trade easy and relieved some of her financial worries.
Using your values as a filter
Value-based spending isn't necessarily about laying out tons of money on what’s important to you. Sometimes, you can prioritize a value while spending little or no money on it. Valuing education doesn’t have to mean spending money on tuition; you could take a workshop at your local library or a free online class.
Once you’ve completed these steps — identifying what you value and don’t value, assessing your spending and adjusting your expenses — you can use your values to guide your money choices and decisions.
A friend, a 51-year-old educational coach in Edison, NJ, gave up her Audi after recognizing her priorities around the type of car she drives had shifted. She traded it in for a less expensive vehicle she felt was more practical.
Since giving up the luxury car, she's been able to save $160 monthly, which she funnels to savings and one of her top values, travel. Besides the monthly savings, she says she feels happier and more comfortable with her car choice and enjoys the freedom from expensive car maintenance.
One of the things I don’t value is having a lot of “stuff,” yet whenever the holiday season rolls around, I find myself leaning into the shopping frenzy more than I care to admit. This past season, I used my values to keep myself in check. The kids got a little less stuff, and I prioritized an experience by seeing a play as a family.
The truth is, no matter your income — fixed or set-for-life — you can always outspend your money. But using your values as a filter for spending and other financial decisions shifts your perspective from lack and scarcity to intention and abundance.
