What is a need vs. want? Knowing the difference can make a big change in your savings. When it comes to spending, knowing the difference between needs and wants can significantly impact your savings account. It’s easy to tell ourselves that many wants are needs, but a conscious effort to separate the two can lead to a bigger savings account and bring you closer to your long-term financial goals. Learn to differentiate wants and needs and the various ways to save with the help from one Texas native as she experiences her monthly spending habits in a whole new way.
For many of us, a long-term financial goal is our main motivation to save. Whether it’s traveling to a new country, paying off student loans, starting your own company, buying your first house, or anything in between - it takes money! By knowing where and why you spend your money, you can develop a focused budget that can transform your long-term goal into a short-term reality. If want to learn more about emotional spending, check out The Psychology of Spending.
Before you dive into crafting one, first look at where your money is going. The first step to changing how you save is to take a closer look at how you spend. We helped one Texas native do just that, by taking it one step further and turning her monthly expenses into a work of art. See Misty’s spending habits transformed into physical installations that help her pick up new savings tricks. With help from State Farm Agent Lakitsia, Misty explores areas in her spending that she can change to find new ways to save. When Misty admires a glass case of nail polish representing her weekly manicures, she and Lakitsia discuss how spending falls under two categories, Wants vs. Needs. By understanding the difference in her buying habits, Misty became better prepared to create a personalized budget to get her closer to owning a home.
After identifying the difference between wants and needs in your monthly expenses, just like Misty, you’re ready to dive into planning a budget. If you don’t know where to start, learn How to Make a Budget with these simple tips. Remember, everyone has a unique financial situation and there are numerous ways to craft a budget. Try making a list of your financial goals with the most attainable at the top, followed but the ones you can work at over time. From there, divvy your paycheck into categories based on the hierarchy you just created. The categories and amount you save for each month for are different for everyone — so remember to focus on your needs and not compare. Based on where you are in your life and what’s important to you, these categories can greatly differ. To see a few hypothetical budgets for inspiration and to learn by example, see a Variety of Scenarios that explain in detail how and why each budget is broken down.
Whatever shape your budget takes, start a plan today to reach it by examining your spending habits.