It is imperative for you to understand the differences between your Wants and Needs to make an effective budget. Which are also known as your “can live withouts” and your “must-haves”.
If you do not firmly outline the differences and understand what they are, you will be doing a great disservice to your personal finances.
So, what exactly are they?
Well… Simply put, our Needs are the essentials that we cannot live without, and I mean LIVE without. Think of your needs as being the things required for survival.
Your Wants are basically, everything else. They are all those bright and shiny things that may make life a little more enjoyable - but aren’t required for our survival.
The infographic below contains a side-by-side comparison of our Wants vs our Needs. It illustrates the essentials that we need to survive, and compares it to what we may think we need to survive”.
Using the infographic above, I want you to begin to determine exactly what your wants and needs are. Once you have established your own personal wants and needs, you are able to look at your spending habits from a different perspective.
When you look at your spending habits from this fabulous new perspective, you are able to clearly see what you need to be spending your money on, as opposed to what you have been spending your money on.
This allows you to start from ground zero, and this is exactly where you need to be starting from in order to create an effective budget. Better yet a Spending Plan. A Spending Plan affords you with the ability to see all your current and future financial commitments and lets you know exactly how much surplus there is before you treat yourself to one of those previously determined “Wants”. It enables you to take control and self-manage your money so that you will never fall short at the end of the week.