Spend on things that you really need

In getting on well with your personal finance, it’s important you understand some basic elements of spending. This brings us to the issue of “Needs and Wants”.

It seems fairly straightforward, but many people confuse wants with needs. Needs are things that are necessary for survival. Some sort of shelter, food and clothing are needed. These are things that you must have to survive. Usually, with the form of shelter come bills like electricity and water. These are bills that you must pay and are therefore needed. If you require medicine to stay alive or healthy enough to get a job, that is a need. And if you are looking into debt management, paying off that debt (or at least making your minimum payments) becomes a need to a certain extent. You may need transportation to a job.

You need to prioritize your needs, however. Food is more important than medicine, usually, and both of these things are more important than your debt payments. But the thing to remember is that all of your needs should be more important than any of your wants.

Read also: The lifestyle habits of the rich can be yours, too!

In society today, wants often become needs. We “need” cable. Sometimes, we take our needs to the level of want. If there is a good public transportation system, and you can’t really afford a car without wreaking havoc on your finances, the car is not a need. You can still fulfill your need to get to work without buying the car that you want. Sometimes a home becomes more of a want when you buy more house than you can afford, and use “creative” financing to get it. Other wants include things like eating at restaurants, entertainment and other recreation activities that are not essential to your survival.

Finally, when creating your personal financial budget it is important to realize that yielding wealth begins with taking care of your needs and cutting back on your wants. Wants are important. They make life easier. But you have to stick to the wants you can afford. Once everything got under control, we could expand our “wants.” However, our budget still ensures that the needs are paid for first.