Budgeting
Unit 3: Determining Your Wants and Needs
It's important that you be able to determine your “wants” and “needs.”. Sometimes we say we “need” things that we don’t. A need is a necessity that we must have to survive such as housing, food, or utilities. A want is something that makes life more interesting and fun, but we could live without if we had to—designer clothes, memberships, or dining out.
In determining your wants and needs, it’s recommended that you write down what you value. Many things can influence your values—friends, family, or experiences. Make certain to evaluate your values in determining how you spend money and why you think you need something. Here are a few simple rules to get you started.
Rule 1: Just because you can afford something and it fits into your budget does not mean you need it.
- Often the road to financial trouble begins when too many wants become supposed needs, or when the purchasing of wants overcomes that of needs. Set priorities for both your wants and needs and work them into your budget.
Rule 2: Evaluate Your Needs and Wants
- Take time to evaluate your purchases and you will have more control over your finances, and you will develop a skill that will help you be a smarter spender through the years to come. We live in a society where almost every product is sold as ’something you need!’ At the end of the day, you are the only one who can truly decide what your needs and wants are.
Rule 3: Set Short-Term and Long-Term Financial Goals
- Make certain to set both short-term and long-term financial goals. Short-term goals are those that you wish to achieve in the next few months. Long-term goals are those that take more than a year to achieve.
Financial Goals |
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|
Priority |
Amount |
Time Frame |
Pay off bills |
____________ |
____________ |
____________ |
Emergency Cash Reserve |
____________ |
____________ |
____________ |
Savings |
____________ |
____________ |
____________ |
New car |
____________ |
____________ |
____________ |
Buy a home |
____________ |
____________ |
____________ |
Student Loan |
____________ |
____________ |
____________ |
College |
____________ |
____________ |
____________ |
Wedding |
____________ |
____________ |
____________ |
Vacation |
____________ |
____________ |
____________ |
Retirement |
____________ |
____________ |
____________ |
Other: |
____________ |
____________ |
____________ |
Rule 4: Evaluate Your Priorities
After writing down your goals and evaluating your spending, make certain to evaluate your budget to determine if you need to make adjustments.
A well written budget is:
- Specific. Write your goals down and prioritize them.
- Measurable. Determine the proper amount of savings or additional money needed to reach your financial goal.
- Attainable. Review the plan to determine if you are working on schedule.
- Realistic. Evaluate your plan for its ability to meet your goals.
- Time-bound. Set dates, deadlines, and dollar amounts for each priority.