Budgeting is essential for achieving financial stability. However, the process can be challenging, particularly when it comes to balancing wants and needs. As human beings, we all have desires and dreams that we want to achieve in life. Nonetheless, we also have needs that we must prioritize to live a healthy and happy life. Balancing your wants and needs in your budget is crucial to your financial wellbeing. This article looks at the importance of balancing wants and needs in your budget, including how you can track your spending, avoid impulse buying, create a budget plan, make sacrifices, save for emergencies, revise your budget, and stay motivated.
Understanding Wants and Needs
When it comes to budgeting, it’s essential to differentiate between wants and needs. Wants are things that you desire but can live without. Needs, on the other hand, are things that you must have to live a healthy and happy life. The key to budgeting is prioritizing your needs over your wants. That means you have to strike a balance between your short-term wants and long-term needs. For example, purchasing a new television may be a want, but buying groceries is a necessity.
The way to prioritize your needs is to focus on the basics. You should start with things that are fundamental to your needs. In that regard, many resources recommend the 50/30/20 budget rule. The 50% is for your essential expenses such as rent, food, and healthcare. The 30% is for your wants, such as entertainment and hobbies, while the remaining 20% is for paying off debt or saving for emergencies.
Developing a clear understanding of wants and needs is the starting point in creating a realistic budget.
Benefits of Balancing Wants and Needs
When you have a balanced budget, not only will you be able to avoid overspending on items you don’t need, but you will also be able to save money. Similarly, you will be able to pay your bills on time, which can help you build good credit. Balancing your wants and needs will also help you avoid debt which can quickly grow out of hand.
The benefit of prioritizing your needs over your wants is that you are investing in your future. Like in the heat of summer, the cool glass of water that you need is not that exciting compared to the ice cream cone that you want. While an ice cream cone may immediately satisfy you, the water is a necessity that keeps you alive and healthy in the long term. The same principle applies to budgeting. The things you need should be a priority over your wants.
Doing so will give you peace of mind and financial security, allowing you to live within your means without constantly worrying about unforeseen financial difficulties.
Tracking Your Spending
One of the essential steps to balancing wants and needs in your budget is to keep track of your spending. Being aware of your expenses will enable you to identify where you are overspending on wants and cut back. Tracking your spending is fundamental to understanding your habits and identifying areas where you can work to improve them. You may also discover areas where you’re skimping on needs and can increase your spending a bit and still stay within budget.
Various tools, both analog and digital, can help you keep track of your expenses. Using a budget planner, smartphone apps, or even a simple notebook can assist you in staying within budget and keeping track of expenses.
Avoiding Impulse Buying
One of the biggest roadblocks to budgeting is impulse buying. It’s important to distinguish between something you genuinely need and something you want. Many times people tend to engage in emotional spending, which is buying based on impulse or emotional state rather than a rational decision-making process.
One of the ways to avoid impulse buying is to think more long-term. Consider how a purchase will affect you in the long term. Sleep on it before you buy it, and only make a purchase once you’ve had time to think about it carefully. Additionally, you can decide to only make purchases using cash since doing so can limit your spending.
Creating a Budget Plan
To balance your wants and needs, you need to create a budget plan. Start by determining your monthly expenses and how much money you have to work with. Once you have this information, you can reasonably allocate funds for both your needs and wants.
When calculating your expenses, ensure that you factor in all income streams and have an understanding of how much cash is coming in and going out. You want to avoid a scenario where you’re not accounting for a particular expense, leading to overspending.
Once you have your financials squared away, you can now list your essential expenses and prioritize them. Rent, utilities, food, and health care are some examples of expenses considered critical needs. Depending on the amount of income you have, you can then go ahead and factor in your wants such as entertainment, travel, or any other fun activities that you may enjoy.
Making Sacrifices
A significant part of balancing your wants and needs is making sacrifices. You may need to cut back on your wants to ensure you’re covering your needs. This can be challenging; saying “no” to yourself or your loved ones can be tough. However, it is necessary to maintain a healthy budget.
Some things you can do to cut back include eating out less frequently, shopping for necessary items only, or taking less costly vacations. Keep in mind that these cuts should not be too extreme as they can have adverse effects on your mental health and overall wellbeing.
Saving for Emergencies
Another important aspect of balancing your budget is saving for emergencies. Unexpected expenses can occur at any time, and if you’re not financially prepared, they can quickly derail your budget. Earmark at least 5-10% of your monthly income for emergencies, like a surprise car or home repair. This can help alleviate the stress and the financial burden if an unexpected expense arises.
Having an emergency fund is vital, and you should include it in your monthly expenses as a priority before you can start allocating resources for your wants.
Revising Your Budget
Your budget is not set in stone. You may need to revise it periodically, especially if there are changes in your income or expenses. Review your budget regularly and make adjustments as necessary. If you’re finding ways to cut back further or can add to your savings account, do it. It’s crucial to maintain a level of discipline when it comes to revising your budget. This level of discipline helps you manage your financials better and make quicker decisions when financial emergencies arise
Staying Motivated
Creating and maintaining a budget can be challenging, but it’s essential to stay motivated. Remember why you’re budgeting, such as saving for that dream vacation or paying off debt. Keeping your goals in mind and rewarding yourself when achieving certain milestones or progress can help you stay on track and avoid overspending on wants.
You can also find resources, such friends or family, who support your financial goals to keep you accountable. It might be tough to keep some goals in mind without any motivation or encouragement from specific individuals. Do not be afraid to ask for help getting or staying motivated.
Conclusion
Balancing your wants and needs in your budget is essential for maintaining financial stability. By prioritizing your needs over your wants, you can save money, pay your bills on time and avoid debt. Remember to track your spending, budget for emergencies, and make sacrifices when necessary. With motivation and perseverance, you can achieve your financial goals and live a financially healthy life.
