Step 3: Separate Needs from Wants
As people track their spending, they discover that some of their money gets used for things they really don’t need. Instead, they merely want them and often buy them impulsively. Impulse spending is unplanned spending; purchasing things that you may or may not need, or spending more on an item than you’d planned.
Learn to have separate looking trips and buying trips. Leave your debit and credit cards at home on looking trips and use that time to plan what you need to buy on your shopping trip.
People spend impulsively for a variety of reasons. If they’re in a good mood, they spend out of pleasure and to keep the good mood. If they’re in a bad mood, they spend to try and make themselves feel better. Some people spend in certain places or at certain times because they feel obligated to do so, e.g. on vacation, during special holiday seasons, when they’re with certain people, or while engaging in specific activities.
Impulse spending habits are often linked to stress levels. A little stress can be motivating but a lot of stress can rob you of your ability to make wise choices between needs and wants. If you would like to learn more about why you spend impulsively and what you can do to change your spending patterns, have a look at this.
Stick a picture of one of your goals on your coffee maker or computer desktop to help you stay focused.
The key to good money management is separating needs from wants. If you aren’t sure if an item is a need or a want, do without it for a period of time. If after that time you truly can’t live without it, it may be a need. However, even the essentials like shelter or transportation involve a want vs. need calculation. For instance, you may have evaluated all possible transportation methods for you to get to work and determined that you need to purchase a car. Fine, but which car you buy is another choice you make.
Do you buy the more expensive SUV that you want, or will a less expensive, more economical vehicle meet your need? Almost everything you buy involves a want vs. need determination and ultimately, how you make these choices will determine if you reach your goals or not.
|Step 4: Design Your Budget
The steps you are going through can also be viewed as a PDF workbook.
You can download a copy, which can be printed and filled out by hand, or
you can download a fillable PDF version, which can be filled out and
saved on your computer.