When it comes to personal finances, most people find themselves struggling. They don’t know where to begin with their journey of getting their personal finances in order. As people think about their budget, they don’t think they will be able to find a way to lower their spending because they spend their money on everything they need. A lot of people don’t realize they have a lot of room in their budgets to make adjustments.
When people begin looking at their budgets, they don’t think they are doing anything out of the ordinary. They often think everything they buy is something they can’t live without. There are even some that know they don’t need it but are pressured into purchasing more than they can afford anyway so they don’t look any different than others. When people look at their budgets, they have to understand their spending habits and understand the difference between a need and a want.
Starting the Process
When people start putting their finances in order, they often begin with a budget. A budget is simply an estimate of monthly income and expenses. It’s a structured list of monies that are earned over the course of the month and what will be spent over the course of that same month. For some, a budget can be created with a pen and a piece of paper and for others, a budget is a complex undertaking that will take days to complete. Before most people can start a budget, they should understand the difference between a need and a want.
What are Needs?
A need is something that a person has to have in order to survive. There are a few things that people need to survive. When a person looks at their lifestyle, they often don’t consider the bare necessities as their only necessities.
The bare necessities that people need to have in order to survive are:
· Clothing (basics)
Those are the bare necessities that anyone would have to have in order to survive. Anything outside of that would be considered a want.
What are Wants?
A want is something that people desire to have that doesn’t a direct effect on their living or dying. It can be considered a luxury item because it’s not something that you need to have to in order to survive. There are some common wants that people today have. Many people want:
· Vacation homes
· Designer clothing
· Cable/Satellite TV
· Cell Phones
Many of these things are what people work for. These items are sometimes regarded as needs because it would inconvenience them if they didn’t have it. It may even embarrass them.
When people begin thinking about their budgets with a clear understanding of the difference between a need and a want, they are better able to find ways to cut the amount of money they spend on unnecessary items. They are able to see that they don’t need to spend more than ½ their monthly salary on dining out, movies and clothing.
It can be hard to set a limit for spending in certain areas. No budget should ever be made that will take away all the things people enjoy. There should be room for pleasurable things but those things should be paid for after the necessities have been paid for. Having a clear understanding of a need and a want will make it easier to pay for and enjoy the luxury items in life.