8 Ways To Let Your Values Guide Your Money Decisions, According to Experts
When people think about values-based spending, there are two angles to explore.
You can spend money on things that have the most meaning to you, such as travel, home cooking or your health. But you can also take a global perspective and support brands that share your values on a global scale. From boycotting retail stores that don't align with your personal beliefs to choosing brand A over brand B because the latter is a Certified B Corp., consumers have options to support the causes they believe in.
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Whether you're focused on your personal lifestyle values or your beliefs that have far-reaching ramifications, making careful spending decisions is one way to approach values-based budgeting. If you take it step by step, it can be easier than you might think.
We asked two values-based investors, Max Kulyk, CEO and founder of Chicory Wealth, and Peter Krull, partner at Earth Equity Advisors, their thoughts on how to get started.
Pinpoint Your Values
Chances are you have a vague idea of what you value in life. After all, the life choices that brought you to this point probably follow a loose theme, whether that's a love for animals or concern about the environment. As you begin to shift your spending, choose the values that resonate most deeply.
"The first step is recognizing that you can't change everything all at once," Kulyk said. "Choose one focus area that you care about most and find one action you can take to align your spending with that focus area."
For instance, Kulyk said that many of his clients are concerned about human rights issues and discrimination.
"This includes the rights of LGBTQ+ individuals and racial groups, but also the treatment of laborers," he said. "They also have a strong desire to -- at a minimum -- do significantly less harm to the world in the way they invest."
Research the Places You Do Business
Change can begin in your neighborhood, with simple shopping decisions.
"If LGBTQ+ rights are important to you, research top corporate donors to anti-LGBTQ+ politicians, choose one, and shop at their competitor instead," Kulyk suggested.
Replace Items Gradually With Ones That Match Your Values
Some sustainable and ethically produced brands do cost more than what people might spend for similar goods at mass market retailers. But Kulyk pointed out that better quality, sustainably produced items may last longer, ultimately representing the better value.
"A 'fast fashion' clothing brand using unethical and cheap labor is likely going to make a cheap product that won't last as long and will require you to buy more of it," Kulyk said. "Start by swapping out just one item with one that is ethically produced and go from there. It doesn't have to be all at once, and in the long run, you may find that the ethical route is the more cost-effective one because the product is of higher quality."
Think Locally
Spending in alignment with your values often means making room in your budget for charitable donations. Even a small donation can go a long way if it goes to the right organization.
"Often, it is the grassroots, community-centered organizations who need your money most," Kulyk said. He recommended using a website like Candid.org to see which nonprofits spend responsibility and where the money goes.
Review Your Investment Portfolio
While you can, and should, make small changes to your everyday purchases to lead a more sustainable lifestyle, larger opportunities for change come on the industrial scale, Krull pointed out.
"Unfortunately, legacy industries attempt to put the onus on the end customer as opposed to being change agents themselves. Ultimately the most important thing that consumers can do is understand how their money is invested and transition to a solutions-based, sustainable portfolio," he said.
Look Beyond ESG If You're Focused on Sustainable Investing
Sustainability is another issue that's often high on people's lists when they consider their values. "Environmental sustainability is a common focus for people because it so viscerally impacts all of us," Kulyk said.
But it's not always easy to find sustainable investments, especially if you're looking at collections of stocks in exchange-traded funds (ETFs). ESG, which stands for environmental, social and governance, is a buzzword that people often confuse with how ethical and sustainable a company is.
"ESG is a risk management tool to assess material investment risk on a company based on environmental, social and governance factors," Krull explained. "Sustainability and sustainable investing is different in that it focuses on solutions to our greatest challenges. ESG is about reducing risk, while sustainability is about investing in solutions for the next economy."
Consider Switching Banks
Krull said that banking is another opportunity to make changes on a larger scale. "Most of the big banks finance fossil fuels. Switch to a local bank or credit union or seek out a bank that focuses on helping finance the energy transition," he said.
Trust Advisors Who Share Your Values
It can be challenging to sift through a company's financials or, worse, the financials and practices of multiple companies in an ETF.
This is especially true when funds marketed as "ESG-based" ignore sustainability and merely focus on companies that appear to be lower-risk.
"If you're looking at a mutual fund or ETF and you see fossil fuel companies, fast food or gambling, you're probably looking at a 'less-bad' ESG-based fund instead of a ground-up, solutions-based sustainable fund," Krull said. "Move on and find another opportunity."
Don't be afraid to seek help from professionals who share your values. "The right financial advisor can help ensure that the money across all of your accounts, including your employer 401(k) and even your health savings account (HSA), are invested ethically," Kulyk said.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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