Before you can , you need to honestly sort your spending into two categories: needs and wants.
Needs
Things required for survival and basic functioning:
- Housing (but not the nicest apartment)
- Utilities
- Basic food (groceries, not restaurants)
- Healthcare
- Transportation to work
- Minimum payments
- Basic clothing
Wants
Everything else:
- Dining out
- Entertainment and subscriptions
- Vacations
- Nicer car than necessary
- Latest phone
- Name brand vs. store brand
- Gym membership you don't use
The Tricky Part
Watch Out
We're really good at convincing ourselves wants are needs.
| What We Say | What's True |
|---|---|
| "I need a car" | You need transportation |
| "I need to eat out" | You need to eat |
| "I need a new phone" | You need a working phone |
| "I need this subscription" | You want entertainment |
The Honest Test
Pro Tip
Ask yourself: "Would I die, lose my job, or face serious consequences without this?" If no, it's a want.
Wants aren't bad. Spending on wants is fine—IF you're meeting your financial goals first.
Priority Order
- True needs
- payoff (especially high-interest)
- Retirement savings
- Wants
Quick Win
Track spending for one month. Honestly label each purchase as need or want. The results might surprise you.