Value-based spending has so many advantages, both for people who have trouble controlling their spending and those who are super frugal. Here's why.It’s interesting how my views on money have evolved since starting this blog.

I’ll admit that I used to be very heavily on the “frugality/cut all the expenses” bandwagon. I hopped the fence between being cheap and frugal quite a few times.

At times, my relationship with money was so bad, I felt like I needed to hoard it all. I was super protective of my bank account, which proved to be detrimental in a lot of ways.

Why? Because I was saving my money out of fear, and fear is a powerful motivator when it comes to money.

Fear of ending up destitute can motivate us to save.

Fear of missing out can cause us to go into debt.

Fear of losing our life savings can keep us out of the stock or real estate market.

Ultimately, acting out of fear isn’t healthy. In my case, I was letting money control me.

I would say I couldn’t afford things when I could – I just didn’t want to spend the money.

But using that language made me believe otherwise. And no matter how much my bank account kept growing, it was never enough.

Enter: value-based spending.

Why Value-Based Spending is Awesome

I realize this is a bit of a weird approach. More often than not, I advocate value-based spending for those who have difficulty controlling their spending habits.

Yet here I am, telling you that value-based spending actually helped me spend my money (in a healthy way).

After trying to stick to a traditional budget for a few months, I realized it wasn’t working.

I was getting caught up in the numbers and beating myself up for going $10 over in groceries, even if I was under-budget or on target overall.

That was only reinforcing my unhealthy relationship with money.

So I switched to a value-based system instead. At the beginning of last year, I declared what values were most important to me. These would be considered things that I was okay to spend on – I didn’t have to guilt trip myself over it.

Those values have mostly stayed the same. They include travel, family, friends, and personal care.

Personal care is pretty loosely defined, but I kind of like it that way. For the most part, I go by this guideline: if it increases my happiness, serves a practical want/need, or is something I’ve been thinking about for a while, I go for it.

(Hence why I finally pulled the trigger and dyed my hair purple. It was something that’s been on my mind since last year, and it’s fun!)

After this, I stopped setting a budget and started monitoring my spending via Mint.

This was much easier for me to manage. As I said, by nature, I’m pretty damn frugal. I won’t pay full-price for much; looking for deals or waiting for a price to drop isn’t a problem for me. I don’t need to have an iron-clad budget to keep me focused on saving.

Let me tell you, this has been SUCH a relief for me. I haven’t kept a budget for about two years, and I’m actually allowing myself to spend on the things that matter to me.


Having Separate Savings Accounts Helps

I’m going to back up a bit here, because one of the biggest things that helped me get past my self-imposed spending boundaries was splitting my savings accounts up.

Basically, I used to have one checking account and one savings account. My money was just sitting there in a lump-sum, and that lump-sum looked so pretty, I couldn’t bring myself to touch it.

Yes, I’m aware of how ridiculous that sounds, but I’m sure I’m not the only one who saves and doesn’t spend money out of (an irrational) fear.

I had some savings goals, but in general, I was simply focused on the big picture of saving more whenever possible. So I saved…and then never spent anything.

The stranger part was that, for the most part, I was okay with it. I concluded that I must not have wanted the things I was originally saving for very much if I wasn’t tempted to pull out the money for it.

Unfortunately, as you might imagine, that didn’t make for a very exciting life. Especially when you consider that I was also turning things down to spend my time working – to earn more.

All work, no play. This was definitely part of the reason I didn’t find the last two years of my life very fulfilling.

I still did the major things like attend conferences and conventions, and I traveled to see family, but outside of that, my money sat in the bank, collecting a small amount of interest.

So I finally took the advice I kept seeing all over the PF community and opened an account with Capital One 360. (The bank I had been using wasn’t into letting customers have multiple savings accounts.)

I wish I had done that sooner. I thought of a list of savings goals and created the following accounts:

  • Taxes (annoying, but necessary)
  • My emergency fund
  • A general travel fund
  • A FinCon fund
  • A fund for another convention I attend
  • Dog!
  • Moving

I didn’t really have a specific way of tossing money into the accounts – it was more or less based on the “budget” I wanted to set for myself, or a reasonable approximation of what I thought these things would cost.

I have to use the tax savings account every quarter (the joys of being self-employed). When I moved earlier this year, and then again a few months ago, you can bet my “Moving” fund gave me peace-of-mind.

I finally adopted a dog and it was a relief knowing the fees and supplies were already accounted for.


I didn’t feel worried about spending during either of the conventions I went to.

I’m free to use my travel fund whenever the need arises, which is nice, in case I want to take an impromptu trip to see my parents or just a weekend away.

The point is, earmarking my money for certain expenses has helped me spend it. Again, I know it sounds ridiculous, but this has improved the quality of my life a LOT, and it’s also improved my relationship with money.

As I said, I no longer feel guilty about spending on the things I had already intended on spending my money on. I don’t have to have an internal debate with myself where I eventually talk myself out of spending my money.

How Does my Spending Reflect my Values?

The biggest purchases I’ve made this year have all revolved around my “special” savings accounts.

  • I traveled back home to visit family and friends in February
  • During that trip, I went on a ski trip with friends that was kind of last-minute
  • I moved, something I’ve been wanting to do for a year
  • I traveled back home yet again
  • I went to visit my parents (mostly for Mother’s Day) for a weekend
  • I attended a convention, which was a week-long thing
  • I moved again (hadn’t really been planning on that, but I over-estimated my initial moving costs, so I had money left anyway)
  • I adopted a dog
  • I dyed my hair, which normally isn’t a big deal, but because it needed to be bleached, dyed, and cut, it cost me way more than I ever thought I’d spend!
  • I went to FinCon
  • I’m currently visiting my parents for a week
  • The rest of the year will likely be dedicated to events with friends and family as the holidays approach, although I’d like to have one weekend away

My day-to-day spending is mostly the same as it has been. I don’t go out to eat much, and if I do, it’s to see friends.

I might spend a little more on groceries, but I’ve been experimenting with eating new things. (I also live with someone who loves to cook.)

I’ve “treated” myself to a few clothing items, but if I get 10 new items a year, that’s a lot. I’m finding my taste in fashion (I mean, it’s mostly non-existent) has changed a little, and I’m not feeling as enthusiastic about my current wardrobe.

However, since I work from home, I can’t justify a complete overhaul, and I don’t have any desire to. I’ve purchased 5 new shirts and I might get a few more (if I find good prices on them) for variety, but I think having one for each day of the week is more than enough.

I also got two new pairs of boots, which I’ve been meaning to get for years now (my old ones are falling apart and were also $15 on clearance 7 years ago). And I got a pair of comfy, fuzzy slippers that I’ve been wearing non-stop. My feet are always cold!


There’s Nothing Crazy Going on

As you can tell, I’m not going wild with my money. Just because I don’t have a strict budget doesn’t mean I give myself permission to spend all my money on travel or something.

The number one reason I advocate value-based spending is because it forces you to focus on what’s important – and actually makes you define what’s important in the first place.

So many people are caught up in what society spends on that they don’t stop to think if it’s right for them.

That can lead to unhappiness, just like not spending your money. If you’re not using your money in a way that brings you happiness, you’re using it wrong – plain and simple.

Value-based spending gets to the root of that. It makes it super easy to know what to say “yes” to, and what to say “no” to.

The less hassle hanging money is, the better!

Do you enjoy value-based spending? How has it helped you? 



  1. Rachel @ The Latte Budget October 26, 2016 at 9:11 AM

    Love, love this! I am similar in that I tend to hoard my money (and I’m not self-employed….just paranoid!) I tried a very detailed budget, but would get so frustrated when I didn’t stick to it perfectly. But like we all know…budgets aren’t perfect! I have since switched to very broad categories for budgeting and saving.

    I can see where it is confusing for people to hear about a budget like this, so I am thankful for your term of value based spending. While I know I will never blow all my money, I have to constantly remind myself that it’s okay (if not GOOD) to spend money once in awhile.

    1. Erin M. October 26, 2016 at 10:26 AM

      I’m glad I’m not alone, haha. Sometimes I feel like I’m the only weirdo that just wants to save more and more. I’ve been doing this ever since I started working, though. I should have clarified that I’ve saved out of fear mostly because I saw my parents barely endure financial disasters due to a lack of savings. Oddly enough, being self-employed hasn’t made a difference.

      Broad categories are great! Unfortunately, along with being a perfectionist, I’m also very detailed, and I like having separations between categories… so that didn’t work for me. You’re right – budgets are NOT perfect, and they’re not meant to be; they’re just supposed to be guidelines. And yes, it is good to spend your money in a way that will make you happy!

  2. Brian @ Debt Discipline October 26, 2016 at 9:42 AM

    Good for you Erin! I know often people feel a budget is to restrictive. That it will not allow them to have fun. Turing to value based spending is a great counter to the tradition budget. It helps eliminate the noise and focus on the important things. We tend to do the same, even though we might spend in different categories.

    1. Erin M. October 26, 2016 at 10:21 AM

      Yes – defining your values definitely helps “eliminate the noise,” as you said, and that’s something a lot of people miss. It’s important to note you can always use value-based spending with a regular budget, too, especially if you need help getting started in controlling your spending. Glad you’ve used it as well!

  3. Financial Panther October 26, 2016 at 10:16 AM

    The use of multiple savings accounts for the things you value and want to buy is so important. I was using Capital One 360 since college, back when it was still ING Direct. Naming the accounts is a big part in keeping you on track with spending on the things you value. Avoiding “hanging” money is big. If it’s just there in a big pile, it’s so easy to think you have it and go and spend it. But if you have a tangible goal with that money, it’s much harder to raid that account.

    1. Erin M. October 26, 2016 at 10:19 AM

      Agreed! Like I said, I had the opposite problem of seeing all that cash there and not wanting to touch it, but neither situation is really desirable. You should always be putting your money to work in some way or another!

  4. Andrew@LivingRichCheaply October 27, 2016 at 9:35 AM

    I am trying to push myself to value based spending and I’ve improved in that aspect. I’ll admit that I probably have a similar mindset as you used to have…I have a hard time parting with my money even though I can probably afford it. But I’m getting better, spend on the things that will truly make you happy and cut the costs where it won’t increase your happiness. Easier said than done sometimes!

    1. Erin M. October 27, 2016 at 9:43 AM

      I’m glad you’re giving it a try! I finally realized after so many years of managing money well (too tightly, probably) that nothing horrible has happened, and that it probably won’t kill me to spend on a few things that make me happy. It’s definitely hard to be rational about it when you’ve been in the saver mindset for so long.

  5. David Barth October 27, 2016 at 11:32 AM

    Great post! Budgeting usually tends to have such a negative connotation, but if you set your budget consistent with your values, your goals, and your priorities in life, it removes the stress altogether. Much easier to manage money than for it to manage us! Thanks for sharing.

    1. Erin M. October 31, 2016 at 8:51 AM

      Thanks David! I agree – when people start to see budgeting as a way to get what they want from life, it becomes much less restrictive and more of a guide.

  6. Centsai October 31, 2016 at 11:49 AM

    I really enjoyed reading this article! I can really relate to the end of the article where you talk about how value-based spending forces your to focus on what’s important and that if you aren’t happy with how your spending your money then you are using it wrong! Living a frugal lifestyle is great, but your happiness should always be your first priority. No one should ever go through life unhappy because of how they spend their money! This is why value-based spending is definitely something people should look into if they don’t do so already!

    1. Erin M. October 31, 2016 at 8:31 PM

      Thanks! I agree. Most people I know who are unhappy with their financial situation haven’t taken the time to evaluate if what they’re spending on actually brings them true, lasting happiness.

  7. Done by Forty November 15, 2016 at 10:46 AM

    We’ve been using CapitalOne360 for all our targeted savings accounts, too, and it’s such a nice system. Way easier than trying to mentally allocate funds for specific purposes from one big slush fund. Plus, it helps us see at a glance if we’re saving enough for travel (we’re not) or have too much in our house fund (we do, since we’ve decided not to move).

    I’m so glad you’re writing here again. You’ve got a great narrative voice.

    1. Erin M. November 17, 2016 at 1:42 PM

      Aw, thanks! It would be embarrassing to go back through my early posts, then – I was still in college-writing-research-paper mode, haha.

      Yep, I love the separate savings accounts for all those reasons. Whenever I see the balance getting too high in my main account, I know it’s time to divvy out funds to my other goals. I just opened a real estate investment savings fund after emptying out my moving fund (since I no longer need it), and my conference funds (since I probably won’t be attending any next year). It’s just nice to have that flexibility to move everything around.

  8. Millennial Money November 22, 2016 at 10:37 PM

    This is an interesting way to track saving. See first what you value and determine how much you will spend on what’s important, and then work backwards from that in determining what to save. Very novel way of looking at finance.

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