Wants vs Needs : How to Revolutionize Your Spending Mindset
When I was in school, I was receiving some modest financial assistance from loans and working part-time at an ice cream store, too. I was reasonably careful with my budget but still didn’t possess what I’ll call Financial Maturity.
By that I mean I wasn’t thinking too much about the future. I knew I shouldn’t be drinking away my student loan money or taking sunny vacations with it because I’d like, ya know, have to pay it off down the road and just because it was in my bank account didn’t mean I had to spend it. But other than a $50/month deposit to an RRSP (retirement savings plan) each month, I hadn’t yet developed mature habits with my spending. I pretty much bought what I wanted if I could afford it.
So I got into some bad habits, like not acknowledging the difference between treats and lifestyle standards – in other words: wants vs. needs. Fortunately/unfortunately, it’s in our nature to get used to things pretty quickly, including indulgences! So I was budgeting for indulgences as if they were necessities.
Here’s what we should include in the category of Necessities:
-gas/transit pass/car payments
-required insurance (renter’s, home, vehicle)
–basic personal care items/cleaning supplies
Almost* anything else is not a necessity for life. Seems pretty brutal, right?
But take a moment here to very honestly consider the things you spend your money on that are not necessities, but that you really feel you need to have in your life. Wander around your house for a minute and take a good look. You’ll probably surprise yourself at how many UNnecessities you see!
Got some in mind? Write them down.
For me, the biggest culprits are:
-wine (sigh) – $13/bottle
-fancy scented hand soap – $7 each
-frivolous makeup beyond the basics (basics for me are concealer stick, powder, mascara) – $15+ a shot
-another new nail polish (who needs 27 shades?! NO ONE, unless she owns a nail salon!) – $10
-scented candles – $15
-movie theatre food = $15
-fabric softener – $7/bottle
literal treats on my grocery list like quality chocolate, fancy tea leaves, vegan ice cream, and garlic-stuffed olives (I know, right? Who wouldn’t want those every week!) – $20/week
Adds up, right? Over the course of 1 month, I would be spending $175 on these indulgences! To put it in perspective, that’s more than the cost of my monthly hydro bill.
I’ve since bumped these expenses over into my ‘fun money’ budget category (one of the smallest lines in my personal budget). This category is just as it sounds: my expendable cash for enjoyable treats or experiences, entertainment, and just-because-I-want-it clothing. What some people call ‘pocket money’.
Many people struggle with considering the below items as treats instead of lifestyle standards, too. You’re not alone!
-dinners out or ordering food in – $60 each time (2 people)
-alcohol – $50+/month
-buying your lunch every day – $30+/week
-just one more pair of cute shoes – $100
-morning latte/coffee at a cafe – $25+/week
-spa services/hair colouring/tanning – $100+/month
-annual winter beach vacations – $3000/year
-bar nights – $80 each time
-professional-grade makeup – $50+/month
So what can you do?
1) Take a look at the Indulgence List you just created. You’re being super honest and thorough with that list, riiiiight?
Choose 2 things you can cut from the list, and start there. It’s reasonable to work in baby steps until you adjust. Like any ‘diet’, you’re way more likely to succeed if you don’t go cold turkey! We tend to regress on our good intentions and habits when we feel deprived.
Just make sure you really do eliminate or cut back on those 2 items, then revisit the list in a couple of months and eliminate 2 more expenses. Repeat until you’ve altered your wants vs needs spending habits.
2) Congrats! Look at all the money you’re saving! Stick it in a savings account instead.
3) The next time you’re about to spend money on something non-essential, take a moment to pause and consider whether this is going to be a treat for you that fits into your ‘spending money’ budget, or whether this item is actually an indulgence that has now become a staple.
This wants vs needs exercise can actually be really helpful for figuring out your ‘Lockdown Budget’: the bare minimum you need to sustain yourself in the event of a job loss or serious illness. Knowing your Lockdown Budget bare-minimum expenses is powerful information when it comes to figuring out your Plan B and determining how much you should set aside in an emergency fund each month. Do yourself a favour and double-down on this new habit! Re-direct your former indulgence spending into your emergency fund instead.
Have you ever done a wants vs needs exercise like this before? What indulgences do you struggle with cutting from your budget? How have you been successful at cutting out or cutting back? I’d LOVE to hear your experiences!
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