Is your income never enough for your needs? Do you feel that there’s not enough money to go around in your household and that saving has become close to impossible? You need to able to clearly distinguish between wants and needs to be able to exercise better control over your income and to budget your money successfully.
People classify wants and needs differently as we live different lifestyles. But there are some general rules that you should always remember:
What are Your Wants?
Wants are those things that you can live without. More often than not, they are expensive, but they could also be cheap delights, which, if you buy too much of, can really hurt your finances (although you may not realize it). Things classified under wants give you instant gratification. If you always give in to your wants, you’re more likely to end up with an empty wallet. Other examples of common wants are:
The latest gadgets
Designer clothes, bags, and shoes
Shopping and eating out
What are Your Needs?
On the other hand, your needs make up for non-negotiable expenses. You need to really prioritize them or else, you would be deprived of things you need to survive. For instance, people need food, clothing, and shelter. Workers need to spend on transportation and work-related expenses, else, they won’t be able to function to their full capacity—which would affect their income. These are the most basic needs.
There are also some needs that a lot of people don’t consider as such; and in the long run, pay dearly for it. The following are examples of some needs that a lot of people take for granted:
Spending too much on the things you want is what stops you from saving. Worse, it could even lead to debt on credit cards. Focusing more on the things we need, on the other hand, could help us have a financially stable future. Balancing your wants and needs need not be a great juggling act. Here are five easy money saving tips that can help you manage your wants and your needs better:
1. Decide. Make a concrete decision within yourself that you would channel more attention to things you really need, over your wants. It’s never easy but start small. Every step you take brings you closer to your goal. You just need to remember to never give up.
2. Redefine happiness. Don’t be dependent on material things when it comes to your happiness. Value people around you, like your family, much more than things that could be bought with money. Teach your children to do the same. If you prioritize the needs of your loved ones, that is surely going to be more fulfilling than any material thing.
3. Do the math. Calculate your cash flow and try following the 50/30/20 rule to budgeting. Simplified, the idea is to spend 50% or half of your income on your needs, 30% should go to your wants, and the remaining 20% should be strictly put for savings and debt reduction. Cut the 20% first, put it in the bank or use it to invest in stocks or mutual funds, or pay your debts. Then, divide the rest on your needs and wants. Note how the wants category is being given a specified allocation. This way, you wouldn’t feel deprived and find saving much more rewarding.
4. Say NO. Now that you have a certain amount allocated for everything, you need to control your urges and what triggers it. If you’re used to give in to your wants, find ways to distract yourself. Or at least postpone any impulsive purchases.
5. Maximize your time. Don’t be impatient. Don’t hate yourself it takes so much time for you to save money. Just make budgeting and saving a habit until it becomes almost like a second nature—that you don’t even think about it anymore. You’ll just be surprised one day how much you’ve managed to save up and invest.
No matter how much income you receive in a month or a year, it will never be enough if you spend uncontrollably and don’t prioritize saving. If you’re aware of how you’re spending, you’ll find that budgeting, and balancing between your wants and needs, much easier.
Ryan Del Villar is a writer and online marketing specialist at Money Max, Philippines’ leading online comparison portal and Philippine market news provider. You can check the website here. Ryan is also a freelance writer at Helm Word, an Online Reputation Management company. He worked as an online video editor before he started his writing career.