Budgeting Basics: Wants vs. Needs

Budgeting Basics: Wants vs. Needs

A basic element of achieving financial success is to understand the balance between what you earn and how much you spend. That’s called budgeting. A budget is a guide that helps you make better decisions about saving and spending. It doesn’t have to be complicated.

Fundamental to successful budgeting is to have a clear understanding of needs and wants.

Needs are by definition those things that are essential to living – food, shelter, transportation, health and safety. To be successful, be realistic in determining your needs. You need transportation. But can you reasonably afford a BMW without sacrificing other necessary expenses?

Wants, on the other hand, are those things that will add more enjoyment to your life, as long as it fits into your budget. Vacations, gym memberships, hobbies, and dining out are a few examples. Beware, though, if you overspend on wants you can easily find yourself taking on debt.

Here are a few budgeting tips:

  • Know how much money you are bringing in.
  • Track your spending and spend mindfully.
  • Avoid taking on too much debt – if you can’t afford it, don’t buy it.
  • Save! Put some money away for special wants or unexpected expenses.

Creating and sticking with a budget is the single best thing you can to do take and keep control of your finances.  Research shows that young people who have good financial habits early-on often grow up to be financially responsible adults.

Try your hand at creating a budget below:

 

Budget Calculator

Insert your monthly income and your monthly and yearly expenses to find out your net monthly and yearly income.

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Budget
 

$1,835

Monthly Savings
 

$22,020

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