A Misaligned Budget: Wants vs Needs.
When it comes to spending money, most of us are pretty good at it. We can convince ourselves to splurge on that new TV quicker than we get up in the morning for a gym session, right? While there’s nothing inherently wrong with splurging on the occasional reward for yourself, when you have a misaligned budget, you’ll end up in debt without provision for the future.
A Misaligned Budget – all theory, no practice
A budget is just a theory until you start to put it into practice and give every dollar a purpose – from savings and groceries to insurance and fine dining experiences. The real action begins when you start to check your budget for your luxuries vs your day-to-day necessary expenses and decide how best to allocate your money.
Your budget, spending habits and saving-savviness won’t matter unless they’re aligned to your values – to what you deem important in life. So, to begin with your budget is to start with your values.
A Misaligned Budget – The Fix
This is where you get the whole family involved – your spouse and kids should be as much a part of the process as you are. You’ve got to start with a good old-fashioned chit-chat with the family. Talk about what you value in life and what’s non-negotiable when it comes to your life and lifestyle. Chat about the principles that guide your family, and the “why” behind your decisions about the school you choose, the neighborhood you live in and the lifestyle you keep.
Every family is different, which is why we’re not sharing the “4 Best Family Values of the Year.” You’ll need to explore your unique beliefs, hopes, dreams and values to design a family creed that incorporates the vision of your future.
This step is important because when everyone is on board, it’s easier to steer the budget in the right direction, and easier still, to stick to it. Through this journey of discovery, you’ll weed out the emotion-led decisions you’ve been making as a family and drill down to the bare necessities of your NEEDS versus your WANTS.
Wants and Needs
This is the basic premise of a good budget – expenses split by WANTS and NEEDS.
A Need is something that you can’t live without – a non-negotiable. It’s necessary for survival. And for your values and spending habits to match up.
A Want is something that you can live without – a nice-to-have. It’s not evil, it’s just something worth saving for or specifically allocating money towards so that you don’t go into debt for things you don’t actually need.
It’s important to know that you don’t have to forgo any and every Want Expense. Rather, you need to understand why and how you are going to afford that expense – be it through careful allocation or saving up. Equally as critical is having conviction and certainty on your Needs. If you’re unsure if something is truly a Need, you’ll second guess your spending and the budget will start falling apart. Rather, when you’ve solidified your values, you can know for sure what you Needs are, and spend wisely and with confidence.
Every family is different.
Just as every family’s values are different, so are your Wants and Needs. Thus, workshopping these carefully with one another will allow you to have clarity and keep everyone moving forward, together in one accord. Decide TOGETHER what are your non-negotiables, and what are superfluous. For some, a private or Christian school might be paramount, but neighborhood less important. While, for others, staying a more expensive neighborhood is vital because family is close by, so that is a non-negotiable, while type of schooling is flexible.
Add in visits to family overseas or across the country, hobbies that keep parents sane and sports that children excel at, you’ve got a lot of moving parts to pin down. Rather than fighting fires each month, strategize your vision into values and rally the family to work as a team on reaching that goal. If saving up is required for sports equipment, or tightening the grocery budget is necessary for family visits, when you’re on the same page, it’s easier to navigate each challenge and decision.
Have you ever thought about Wants and Needs in your budget? Perhaps now’s the time to start!
It might be a bit of hurdle getting started on the process, but you won’t regret it when you’re sailing through your progress bars on your Wealthstack Dashboard – reaching goals and building a future the whole family can enjoy.
Speak to one of our Financial Experts if you need a helping hand with your budget prepping or Dashboard. We’d love to help!