Whether you’re just starting out or have been freelancing for years, the question of whether you’re purchasing something that’s useful for your business is bound to crop up.
When you feel regretful about a business purchase, there could be a number of reasons. Maybe you were swayed by a shiny Instagram ad. Perhaps you thought all the endorsements by bigger businesses meant that a graphic design tool will work for you.
The truth is, your business is unique and with its own set of values. That means when it comes to ensuring your purchases are helpful, using a tactic called values-based spending can provide a much-needed road map.
What is values-based spending?
In a nutshell, values-based spending is using your values as a guidepost to tell you what you should and shouldn’t spend money on. Think of it as a way to look within yourself and internal metrics in order to figure out which purchases will give you the best return.
Having this guidepost should make spending decisions much easier because you’ve taken the time to figure out what you value the most in your business. That way, when you’re assessing your current business expenses or debating if you want to pay for a new product or service, you’ll be able to figure out if it’ll help — or hinder — your business.
A common misconception about values-based spending is that the term “value” refers to items. For example, you value having quality electronics, so you’re willing to spend more money on them. While that’s great, it doesn’t take into account why you value that item.
Instead, think of values as a concept or an idea. Going back to the electronics example, maybe you value these high-quality items because the ergonomic mouse prevents you from getting wrist pain. In this case, the value you find important is health.
Or the more expensive wireless modem means faster internet — which means you value productivity or efficiency.
Thinking about values in this way allows you to look at the bigger picture. While it’s not possible to love every aspect of what you do, if you’re unhappy overall, then you need to take a closer look as to why that is. In many cases, making the right purchases can help you feel more at ease in your work.
Before moving on, it’s important to pay your taxes or other obligatory expenses like business debt (there’s no avoiding that!). Though we’re sure many of you out there hate giving such a large percentage to Uncle Sam, consider the fact that the money will go toward things that will benefit you, like safe roads, government workers, and other types of benefits.
After all, honoring your obligations — like paying taxes and debt — will ensure that your business thrives for the long haul.
What if I don’t know what my values are?
You’re not alone. It seems much easier to think about what your personal values are instead of your business values, but they’re not all that much different. In fact, since you’re a one-person operation, many of your personal and business values will overlap.
For example, you hate doing housework and will find ways to avoid it at all costs. When you finally can’t ignore those piles of dishes anymore, you stick them in the dishwasher. In your business, you hate feeling like you have to write a sticky note to yourself reminding you to follow up with your client outreach efforts.
Guess what? In both of these cases, you value efficiency — you’d rather find some way to delegate or outsource what you feel as monotonous or menial work so it can free up your time to work on other areas of your business (and life) that matter to you more.
All this to say, if you don’t know what your business values are, not to worry. You can start by looking at what areas in your personal life you value and go from there. Or if you haven’t even looked at what you personally value, it’s as simple as asking yourself a few questions and taking some time to assess how you currently run your business.
Where do I start?
Now that you know what values-based spending can look like, here are the steps to incorporate it into your business:
Do an emotional assessment of your business
Yes, spending money is about much more than the numbers. Think about it: Money should be a tool to enhance your business (and by extension your life). So looking at your emotional reactions to how you’ve been running your business so far will provide some great insights into what may need to change. This includes changing up how you’ve been allocating your expenses.
To start, grab a pen and notebook (typing in a word processor is fine, too) and dissect what you love and hate about your business. Get specific — boil it down to the individual tasks and why you feel that way about them.
For example, you love video calls with clients because you love being able to brainstorm with them. However, you hate emailing back and forth to nail down a time to meet.
Doing this assessment doesn’t need to be done all at once. You can work on it using pockets of time here and there.
Track your business spending
Understanding your numbers can inform you of your current and past behavior when it comes to your business spending. In other words, how can you change your ways if you don’t know what you’re doing in the first place?
For most of us, tracking business spending is pretty easy — grab your bank, credit card, or PayPal transactions, and it’s all there. Ideally, you’ll have at least six months’ worth of statements, but even three months is fine.
Sit down and write the types of expenses you’re spending on. Categories such as automation, client-facing software, and website maintenance are a good place to start.
Set this list aside for later.
Write down a list of preliminary values
By now, you may have a clearer idea of your business values. Take a look at the list you created of the things you enjoy and don’t enjoy about your business, and see if there are any commonalities. Remember, values are an idea or a concept, not things.
List your values in order of importance. To make things easier, try not to have more than a list of five values.
Look at your numbers
Here’s where you bring everything together. Using your list of values, take a look at what you’ve been spending on in your business. Are your purchases aligned with them? Make a note of how you feel about each purchase. If you feel good about them, was it because it’s aligned with a value?
Keep going down your list of expenses and decide what expenses you want to increase, decrease, or eliminate.
Make a preliminary budget
Making a preliminary budget may seem intimidating, but this is simply the first iteration of it. Start with what you’ve already set aside for business expenses, then work to assign a percentage for each budget category.
You can determine this on your own, but a good rule of thumb is that the value you prioritize the most should have the highest percentage.
Take it for a test run
Now it’s time to apply your new budget. Try it out for a few months to assess how you feel or whether it’s really made a difference in your business. If so, great! If not, see what’s working and not and refine.
When it comes to taking your new business budget for a test run, you might be tempted to make an impulsive decision — and that’s OK. Here’s where you can get back to your values in the moment:
- Put a list of your business values on your desk or phone to refer to when this happens.
- Ask yourself how this purchase honors or goes against your values.
- Ask yourself if there’s something you have in your arsenal right now you can use instead (if you’re unsure of the above question).
- Ask if in six months you’ll come to regret making this purchase.
You deserve to love your business
Work doesn’t have to feel difficult all the time. Take the time to learn what you love about your business and make it happen. Using values-based spending is a way to provide much-needed insight into how you can make your money work for you so that it becomes a tool to enhance your life.
Sarah Li Cain is a finance writer and a candidate for the Accredited Financial Counselor designation whose work has appeared in places like Bankrate, Business Insider, Financial Planning Association, Investopedia, Kiplinger, and Redbook. She’s the host of Beyond The Dollar, where her and her guests have deep and honest conversations about money affects their well-being, and Podcasting Q&A, a branded podcast from Buzzsprout.