budget living

How to Determine Budget Needs from Wants

budgetSpending. Are you good at it? Do you over do it? After making money, how we spend money is a key factor in becoming a financially responsible adult. One of the biggest struggles women have with their spending is determining needs from wants.

Take a minute and think about the last purchase you made. Did you absolutely need it to live, stay warm or be healthy? Or did you just want it because it was pretty, fit perfectly or was on sale? I don’t know about you, but that’s a constant struggle in my life.

I leave myself a bit of fun money every month – a very small bit. I allow myself to spend $100 each month on whatever I want. Sometimes that’s a night out at the movies with friends, a daily iced latte or a new warm sweater. Whatever it is I don’t let myself spend more than $100 because that’s my financial breaking point. It’s an amount that I would feel sick about if I ever lost or wasted it. Actually, my financial breaking point is a lot less than that, I’ve stressed out for days over wasting $20 on a bad meal. I really hate that.

If overspending, impulse spending or bad budgeting are contributing factors to your current financial situation, today is the day to fix them. The next time you want to buy something ask yourself if you truly need it to live or if you just want it because you feel like spending money. Trust me, you’ll be shocked to see how little money we actually need to live.

Ask yourself these questions to determine budget needs from wants:

Is it broken?

One of my biggest pet peeves is people who upgrade their technology gear just because a new model is out on the market. Buying a new cell phone or television when yours is still working seems like a complete waste of money to me.

Truth be told I’m not a fan of electronics and I only buy a new laptop when mine stops working. Some may think that’s crazy because it’s smart to have the latest technology, but I think it’s being financially responsible. Upgrade gear when yours is worn out, not just because you want to have a new model.

Are you financing the purchase?

If you want something and can’t afford it, maybe you don’t truly need it. If using credit to get the things you want is the only way you can get them then maybe you can live without them. The problem with using borrowed money is it accumulates interest so your purchase ends up costing a lot more than the original ticket price.

When we moved two years ago we financed the purchase of all our new furniture including a sofa and new king sized bed. We took six months to pay off the balance, which isn’t too long, but we still accumulated interest during that time. Now that we’re planning to buy a house we have already started saving cash and expect to have cash for everything we need to buy on moving day.

Is it a necessity to live?

If you don’t need an item to keep your belly full, stay warm or keep a roof over your head then it’s not a necessity. That’s the rule I live by. It’s also the main reason why I don’t mind spending money on take out food, but that’s a choice I make.

I don’t buy a lot of new clothes because I have clothes that fit, however I hate cooking and therefore choose to eat out when I feel like it. The way to save money is to always get food to go. I don’t order delivery or eat out in restaurants and by doing that I save on the cost of delivery fees and tips. It’s the budget-friendly way to afford eating out.

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