When you are working within a budget, there are times when you need to determine if a purchase you want to make is something you need or simply something you want. There are many things in the world that we may desire but are simply unattainable due to our incomes. For example, you may want to own a high-end sports car or a large home with property, but if the funds simply are not there, it is not a purchase that you can feasibly make.
Needing to determine a want from a need is more commonly encountered on a much smaller scale. It may be a dress or a suit you are considering purchasing, or even whether or not to go out for dinner this weekend. Budgeting your money may mean that you cannot enjoy all the luxuries and fun times that life has to offer, but it could be the difference between having money put aside for a rainy day or even funding your retirement.
How can you determine if you are basing your financial decisions on your actual needs, not materialistic desires?
Knowing what you can afford to spend is a key aspect in creating an effective budget. You may earn an annual salary of $60,000 per year, but after taxes, insurance, and any other deductions you incur, the amount you actually take home is considerably less. Differentiating the net income of your household versus your annual household operating expenses will quickly put your liquidity into perspective.
If you work, your time has been assigned a dollar value by your employer. When considering a purchase, consider how many hours you will need to work to cover the expense. This will dramatically change your perspective on how you spend your hard-earned money. Something that seems like a necessity may suddenly seem unnecessary. This isn’t meant to take all the fun out of shopping or enjoying yourself. It is simply a way to keep your purchases grounded in the reality of what you need to do in order to fund them.
We’ve all made impulsive purchases that seemed like good ideas in the moment, only to look back in regret. This is especially true when you leave yourself short for other important things, like rent, groceries and utility bills. Before you know it, your scrambling around looking for “payday loans near me” online to get the cash you need. Being more mindful of why you are making purchases can be the beginning of a whole new relationship with money and the way you view it.
A necessity is something that is essential, like a roof over your head and the food you need to nourish your body. When creating a budget, be certain that you deduct your rent/mortgage, utilities, and grocery costs first, those items are needs, not wants. Any income left in your budget after those important items are deducted, can be used for other purposes, like savings, retirement, entertainment, dinner with friends, or clothing.
How long has it been since you’ve seen the back of your closet or cabinets? It may be time to clean house! You will probably find items you forgot you had. Finding an item that you can use, sell or repurpose can save money in your budget, but if not, it may be something you can donate to a charity of your choice. Just think, you can help someone in need, get a tax deduction and get rid of any clutter you have accumulated.
A clean house means an environment that is conducive to a calm mind, which is essential in determining wants from needs. Some things like bills and rent simply can’t wait, which is when the “payday loans near me” web search comes into play. Other purchases are seeded in our insecurities, emotions or other negative places in our psyche. Learning to recognize the difference between the two is the first step in growing a more healthy relationship between you, your money and how you spend it.