I’ve always told my clients that using a spending plan will highlight the ways you are- and aren’t—taking care of yourself. It’s not just about the numbers—and it’s certainly not about “budgeting.” Having a plan not only helps you evaluate how many of your needs are really being met; it’s also an important tool for exploring what your needs really are.
This is easier said than done, isn’t it? The National Council for Economic Education tells us that by the fourth grade, a child should be able to describe the difference between needs and wants, but the truth is that for many people—long after fourth grade—they aren’t able to make this important distinction.
What they do instead is rationalize.
In fact, most of us are masters when it comes to justifying our expenditures. For example, you might feel you “need” a new suit. But maybe a new blouse or shirt will make an old suit feel new. Or you may be looking at a larger purchase—you feel you “need” a new car, for example. It may be true that you do need another car. And while you might want it to be brand-new, a used car could allow you to meet your need in a way that fits your spending plan—meaning it’s currently a better fit for your personal finances.
Wants can be deferred, but needs must be attended to first, either by finding a way to meet the need for less or by finding money elsewhere in your spending plan to cover the expense. Classifying wants as needs is one thing that will put you further into debt and keep you on the treadmill you’re trying to escape.
Learn more about our Financial Recovery(sm) Foundational Training classes. The next class begins Thursday, March 3, 2011 and there are still two openings. To learn more and apply for an interview, click here.