How you manage, discuss, spend, borrow, save, share and invest your money has a huge impact on your personal financial success. Essential to this process: understanding the difference between a want and a need and budgeting accordingly. So, how do you get started? Follow these steps and you’ll be will on your way to having control of your money, figuring out your wants and needs and becoming a financial success!
List Your Expenses. Get a piece of paper and pen or your computer and create a list of all of your monthly expenses. This should be quick and easy.
Evaluate Your List. After you have listed out all of your expenses, honestly evaluate which expenses are needs and which are wants. Just to clarify, a “need” is something that is necessary, such as food, clothing or shelter. A “want” is something you would like to have, like those fabulous shoes, weekly manicures or a vacation.
Prioritize Needs & Wants. After you have listed out your needs and wants, prioritize this list (starting with your needs first) from most important to least important. Based on your values, decide what is really important to be spending your money on.
Create a New Budget. You now have all of the information in order to create a new budget for yourself. The first step in creating a new budget is to list out and take care of your true needs first and the wants that are of greatest importance to you next.
Double Check. Ask yourself one last time, can you cut back anymore on any of the items on your list? Can you reduce your eating out or getting coffee everyday? This step is not to nickel and dime your expenses, but rather allows you to see the areas that you can cut back a little bit more on.
Remember one person’s wants may be another person’s needs, so make sure to focus only on your financial situation and not to compare yourself to anyone else.