Identify where your money is going on a day-to-day basis. Then, the next step is to look where your money is going on a month-to-month basis.
- weekly basics (like food, groceries, toiletries)
- insurance (like home, motor, life insurance, car registration.)
- utilities (Internet and telephony, electricity, water)
- ad hoc medical expenses.
- unexpected expenses (such as a new washing machine, TV or water heater)
- monthly pet expenditure and ad hoc vet bills.
- expected and unexpected maintenance to your home
- adults and children clothing and shoes
- restaurants, aperitifs, concerts, movies, going abroad or a weekend break, subscriptions, paid Apps., paid games.
- transport (any car loan repayments, fuel, repairs, services, VRT)
- personal (gym membership fees, hair, beauty, babysitting)
- housing – rent or home loan
- credit card debts
- retirement plans/investment plans
There are a lot of financial categories to consider but if you prioritise, and give them a number, which numbers illustrate the order of prioritisation, you would realise that those expenses with the highest priority ranking are the ones that are essential to you, and your family.. Food, clothing, and housing are ’needs’: whilst you can live without a mobile phone you cannot live with no food.
Whatever you have placed fourth, fifth, sixth, etc. their ranking might change, depending on the circumstances. For example, when a home insurance or car insurance is due, it is imperative that this is paid without delay.
Beyond needs there are wants – things you desire / want to possess and services you ask for to make your life more comfortable and pleasant such as hair and beauty, the latest mobile phone, a smart watch. A want is something you would like to have, but not crucial to your well being.
Ask – Do you really need that want? Can you do without it? Do you really need a luxury brand when you can do with a far less expensive one? Are you placing your basic needs and priorities first?
Find a balance between (a) your needs and wants in the short term with (b) the personal financial goals you want to attain in the future.
- Decisions taken instantly affect tomorrow.
- Learn how to distinguish between needs and wants, so you
1. are able to finance your present and future needs
2. save for more rewarding wants
Why is it important that you prioritise your budget and take charge of your money?