Value-Based Spending: A Mindful Budgeting Method

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Value-based spending: You may not have heard of it, but I believe it has the power to change your financial life. How? By helping you determine what your working hours are worth and how the income you earn is best spent.

In this article, I’ll explain the concept of value-based spending and how it can help you improve your finances. I’ll also give you information on how you can use value-based spending to help reach your long-term financial goals.

What Is Value-Based Spending?

Value-based spending is the practice of understanding what a purchase actually costs you before you make that purchase.

I first discovered value-based spending back in 2013. I had nickeled and dimed my way into tens of thousands in consumer debt, and I couldn’t figure out how.

There were no rewards to go with my high credit card balances. No vacations. No fancy clothes or furniture in my house. What had happened?

After going over a couple of years of credit card statements, it became clear what had happened: drive-thru runs; restaurant and takeout meals; random purchases at big box stores.

There were dozens of $10, $20, and $50 purchases here and there for the past several years. No real thought to a budget; I just spent what I wanted to.

Turning the Tables

I was frustrated when I realized that most of my consumer debt came from purchases that ended up having no real impact on my life. I felt irresponsible and like I had wasted so much time and money.

In my quest to right my financial ship, I started searching the internet for ways to get out of debt. Somewhere along that path I came across this gem called value-based spending.

I started using the formula as I went over prior purchases. And that’s when my money situation really started to improve.


Value-Based Spending Formula

The “formula” for value-based spending is simple: Take “X” dollars for any potential purchase divided by your hourly take-home wage.

In other words, how much time do you have to spend at your job to pay for that fast food drive-thru run?

Let’s say you spend $50 at your local big box store with no plan going in. You find a shirt or two on clearance, grab a movie you’ve been wanting and pick up a couple of other new and shiny non-necessities. Those items may — or may not — bring you joy by the end of the week.

If your take-home pay is $20 an hour, you’ve got to work 2.5 hours to pay for that big box store run. Here’s the all-important question: Was it worth it?

Were those items worth spending an extra 2.5 hours at work? If you had to work the 2.5 hours before you bought the stuff in order to get it, would you have made those purchases?

This is where the rubber meets the road, my friends. When you ask yourself that question each time you get ready to buy something, you’ll start to learn some things about yourself and your spending habits. And you’ll also end up gaining insight into what is truly important to you.

You can almost always find ways to earn more cash. But you can’t get back those hours you spent at work.

So the question then becomes: Given a choice, would you have spent those 2.5 hours working to get your random big box purchases? Or would you have rather spent those 2.5 hours playing with your kid (or taking a solitary hike at a nearby park or spending a romantic evening at home with your partner)?

Determining Your Value-Based Spending Parameters

When you start to look at expenditures within value-based parameters, your money becomes more valuable to you. And wasting your money on what you realize are non-valuable expenditures becomes a bigger deal.

The thing to remember about value-based spending is that there are no right or wrong answers that apply to everyone. But there are right and wrong answers that apply to you personally.

Spending two+ hours working for that big box store purchase might not be worth it to you. However, it might be worth it to someone else.


In other words, it’s up to you to analyze your purchases and determine which expenditures bring value into your life — and which do not.

This analysis will take some time and practice. Your answers and decisions, made in the new context of value-based spending, can vary based on the day and the circumstances.

As an example, I typically don’t spend much money on restaurant meals for myself and my four kids. To work for two or three hours to eat out isn’t usually worth it to me.

And then there are days like yesterday. I got up at 4 a.m. Worked on some writing assignments. Started homeschooling the kids at 9 a.m. Got a call from my mom at 11 a.m., and she needed my help.

Showed a house at 2 p.m. (I’m a realtor). Came home to a broken clothes dryer at 4 p.m. Finished up school work with the kids by 6 p.m. (after I fixed the dryer). I was 14 hours into the day and still had more to do.

I was beat. The kids were tired. And there was no processed food in the freezer. So we spent $50 on takeout at the local Chinese place.

And it was worth every penny.

Value-Based Spending and Your Budget

Another important thing to remember about value-based spending is that it needs to work in tandem with your budget.

Without a budget and specific dollar amounts targeted for each spending category, you can always “find” purchases to make.

The goal is to use your budget and the value-based spending method to eliminate unworthy purchases — and then use the money you’re no longer wasting to work toward your financial goals.


As an example, you set target spending amounts for fluid expenditures such as:

  • Groceries
  • Entertainment
  • Eating out
  • Miscellaneous items

Then keep those target spending limits in mind as you go through the month. Use cash envelopes if that helps you stay on track.

After you use the value-based spending analysis for each purchase you make, there’s money left over in one of those envelopes, make a plan for that money. You can save it for holiday gifts, plan a vacation, make an extra principal payment on your mortgage or put some extra cash into your retirement account.

As you get used to deciding on expenditures based on your values, you’ll get used to having extra cash. And you’ll get used to having a solid value-based spending plan for that extra cash that will help you achieve your financial goals.

Cleaning Your Financial House

Think of the value-based process as the financial version giving your house a deep clean: You throw away the useless items (or purchases) you don’t really need.

Then you take the items (i.e., money) that are left and give them a deep clean. You organize them in a way that makes the most sense for you and your family’s lifestyle.

When you implement a value-based spending program and really start thinking about which purchases are worth the time you had to spend to earn the money for them — you may find that your spending priorities have changed.

Paying off debt might just become easier as might achieving a plan for financial independence. At the very least, you may find that thinking about your financial situation is a little less stressful. And you might also find a little more abundance in your bank account.

Look over your expenses for the last few months. Think about whether each one was worth the time you put in to earn the money to make that purchase.

Your time is valuable. You work hard for the money you earn. Work to make your spending habits align with that. Because you deserve better.


Does the number of hours you have to work to make a purchase influence whether or not you choose to make that purchase? Let us know in the comments.

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