Financial Management Tip Day 6: The Blurry Line Between Needs vs. Wants

Financial Management Tip Day 6: Do you understand the difference between your needs and your wants?

We live in a world full of consumerism. We get into a mindset of want, want, want but we need to work towards shifting our priorities and thoughts. It takes time to make such shifts. And you will make mistakes- slip-ups from time to time. I think its important to look at small changes before going radical.

A need is something you have to have (essential)- you need it to live. There are really 5 categories of needs: a roof over your head, healthy food and water, basic medical and hygiene products,  reliable transportation, and basic clothing. Some people consider there means of making an income as being a need. Other people consider life and disability insurance as a means of providing for their family.

Everything else is a want. A want is something you would like to have (nice to have but not essential). You want brand-name clothing, you want designer shoes, a new car, a fancy house, the newest technology, etc. I want junk food or cable.

There is a blurry line between our needs and our wants- we need a reliable cell phone but do we need the latest technology in our cell phone? We need a reliable car but do we need a fancy car?

It definitely seems like these words are now the same in advertising. There is a popular tv ad right now that uses the words “I need that” when advertising a tablet and speakers. When did we become so greedy?

Am I suggesting getting rid of all your wants, no but I am suggesting you take a look at where the bulk of your money is going and making sure that your priority (you pay first) your needs and than you can add in an appropriate amount of wants based on what you can afford.

If you lost your job today, recognizing where your wants are and that there is room for cuts within your budget helps you realize what is truly necessary and important.

For example, a few months ago we took a pay cut so we started looking at our budget and what we could cut out- we lowered our cable, internet, and home phone bill (changed companies for a better rate and better service), lowered the package on both of our cell phones, lowered the amounts we were spending on our variable spending just to name a few changes. These are small changes in our lives- do we really notice these changes? No, we don’t really notice them.

However, did we take out all our wants? No, we still have netflix, we still get the newspaper daily, we have money in our entertainment jar but we spend our money much more wisely now than before.

Every thing concerning money is a choice- some choices are easier than others to make.

Do you know where you could cut back if you had to? What ways have you tried to cut back in the past?

Financial Management Tip Day 4: Categorize Your Spending

Financial Management Tip Day 4: Categorize Your Spending

Yesterday’s tip was on the importance of tracking your spending and today’s financial management tip is to take the information/numbers you gathered from yesterday’s tip and now you must categorize your spending. This take’s it beyond a mix of numbers and rather organizes them so that you can begin to see the bigger picture of where your money is going on a daily and monthly basis.

Now there are a few different ways to do this- you can write right beside your notes in your spending journal especially if you only spending money from one category in each shopping trip. For example, do you have a shopping trip that you spend money on groceries, toiletries, kids, and clothing all on 1 receipt?

If you are extremely visual, you could also use different color highlighters or markers to show each different category.

So the first question you are going to ask is…..What are the categories? I believe there isn’t a one fits all system for categories of spending. I like to have more categories because I make them very specific.

Also no miscellaneous category!

So let’s look at yesterday sample

Sample (7 days): Sally recorded the in’s and out’s of her money for 1 week….let’s examine it more closely

Date / Amount / Store / What you bought

June 9th/ +$450.00 /pay cheque (IN)

June 9th/ -$55.50 / monthly cell phone bill (OUT- UTILITIES)

June 9th/ -$3.40 /local coffee shop /coffee and brownie (OUT- EITHER ENTERTAINMENT OR EATING OUT)

June 9th/ -$24.80/grocery store/ milk, eggs, bread, bananas, apples, cream cheese (OUT- GROCERIES/FOOD)

June 9th/ -$7.90/drug store/magazine (OUT- LEISURE-MAGAZINE)

June 10th/ -$40.00/gas station/gas (TRANSPORTATION- GAS)

June 10th/ -$6.75/pizza/pizza for lunch (OUT- EITHER ENTERTAINMENT OR EATING OUT)

June 10th/-$75.00/vet bill for Fluffy (OUT- PETS)

June 10th/-$17.90/grocery store/ fried chicken for supper (OUT- GROCERIES/FOOD OR ENTERTAINMENT/EATING OUT)

June 11th/-$21.49/walmart/kitty litter, birthday card, new shirt (OUT- PETS, GIFTS, CLOTHING)

June 11th/-$5.40/coffee shop/coffee and a treat (OUT- EITHER ENTERTAINMENT OR EATING OUT)

June 11th/-$9.80/book store/new book (OUT- LEISURE/HOBBY)

June 12th/-$30.00/walmart/new toy for Johnny (OUT- KIDS)

June 12th/-$7.80/sandwich shop for lunch (OUT- EITHER ENTERTAINMENT OR EATING OUT)

June 12th/-$15.40/grocery store/supper (ground beef, spaghetti sauce, spaghetti, garlic bread) (OUT- GROCERIES/FOOD)

June 13th/ -$80.50/car maintenance (oil change) (OUT- TRANSPORTATION- MAINTENANCE)

June 13th/ -$120.00/ costco/ toilet paper, laundry soap, steak, salad mix, box of oranges, multivitamins, box of cereal (OUT- GROCERIES/FOOD, HOUSEHOLD, TOILETRIES, MEDICAL)

June 13th/ -$33.50/movie theater/ movie tickets and concession treats (OUT- EITHER ENTERTAINMENT OR EATING OUT)

June 14th/ -$8.80/chinese food for lunch (OUT- EITHER ENTERTAINMENT OR EATING OUT)

June 14th/-$56.70/clothing store/new shift and pants (OUT- CLOTHING)

June 14th/-$20.30/drug store/conditioner, shampoo, body wash, nail polish (OUT- TOILETRIES)

June 15th/-$11.30/drug store/prescription (OUT-MEDICAL)

June 15th/-$6.45/coffee and donut (OUT- EITHER ENTERTAINMENT OR EATING OUT)

June 15th/-$78.90/ car insurance (OUT- TRANSPORTATION-INSURANCE)

Today we will look at examining where Sally’s money went in a 7 day span.

  • Is she in the red or the black? RED Sally overspent by -$287.59
  • Did she under or over spend? Over spent
  • What hasn’t Sally paid this month? Just to name a few items missing but what about rent, heat, lights, house or apartment insurance, debt repayments, television/internet/home phone, savings just to name a few missing aspects that Sally hasn’t paid
  • Where has Sally’s money gone- what did she spend money on? Sally spent considerable money on her wants this month including toiletries, clothing, entertainment/eating out
  • What were Sally’s needs vs. wants? Needs: Food/Groceries, Vet Bills -preventive or curative for Fluffy, insurance on her vehicle, regular and preventable maintenance on her vehicle, a basic cell phone package so Johnny can reach her   Wants: Magazine, books, entertainment/eating out, non basic toiletries such as nail polish, clothing
  • What patterns do you see? Sally likes to shop. Sally doesn’t meal plan- supper seems spur of the moment. Maybe Sally doesn’t like to cook. Sally could bring her lunch with her rather than eating out all the time. Sally might go with the crowd from work for lunch and coffee (could she go but not spend money)
  • How could Sally save money? Sally could meal plan- shop the sales, have a specific grocery list, coupon. Sally needs a more concrete plan for her money- what is essential? Sally could brown-bag her lunch (a plan for lunches)

Financial Management Tip Day 3: Do you know what you are currently spending?

Financial Management Tip Day 3: What are you currently spending?

Have you considered your current spending and spending habits?

Start today and track every dollar and cent that you receive and spend (in and out).

How do you develop a financial plan if you have no data to work with? How do you figure what to change without information?

Look at bank and credit card statements for any track-able spending.

Keep your receipts so if you need to look back you can!

Usable/easy to implement advice: Where do you start?

  • Be specific
  • Be honest (lying will only hurt you)
  • Include enough information (dates, exact amounts, store, what you spent money on)
  • Start with 1 month of information and expand it out to 2-3 months to get an average since your spending is probably not identical every month.
  • Do not use the word miscellaneous- name it
  • When completed, you need to examine the information you gathered and look for patterns in your spending. Ask key questions like….
  • Who did you spend money on? *Did you spend extra money on the kids or pets this month?
  • Why did you spend money? *Boredom or a reward
  • When did you spend money? *On a lunch break, after work, weekends
  • What was your mood? *Happy, sad, mad, fearful, bored
  • What was going on in your life at that time? *Did you receive a job promotion or bonus? Did you lose your job? Marital fighting
  • Did you need or want the item?
  • Was it useful/used/consumed?
  • Did you have another item that could of worked at home?

Sample (7 days): Sally recorded the in’s and out’s of her money for 1 week….let’s examine it more closely

Date / Amount / Store / What you bought

June 9th/ +$450.00 /pay cheque

June 9th/ -$55.50 / monthly cell phone bill

June 9th/ -$3.40 /local coffee shop /coffee and brownie

June 9th/ -$24.80/grocery store/ milk, eggs, bread, bananas, apples, cream cheese

June 9th/ -$7.90/drug store/magazine

June 10th/ -$40.00/gas station/gas

June 10th/ -$6.75/pizza/pizza for lunch

June 10th/-$75.00/vet bill for Fluffy

June 10th/-$17.90/grocery store/ fried chicken for supper

June 11th/-$21.49/walmart/kitty litter, birthday card, new shirt

June 11th/-$5.40/coffee shop/coffee and a treat

June 11th/-$9.80/book store/new book

June 12th/-$30.00/walmart/new toy for Johnny

June 12th/-$7.80/sandwich shop for lunch

June 12th/-$15.40/grocery store/supper (ground beef, spaghetti sauce, spaghetti, garlic bread)

June 13th/ -$80.50/car maintenance (oil change)

June 13th/ -$120.00/ costco/ toilet paper, laundry soap, steak, salad mix, box of oranges, multivitamins, box of cereal

June 13th/ -$33.50/movie theater/ movie tickets and concession treats

June 14th/ -$8.80/chinese food for lunch

June 14th/-$56.70/clothing store/new shift and pants

June 14th/-$20.30/drug store/conditioner, shampoo, body wash, nail polish

June 15th/-$11.30/drug store/prescription

June 15th/-$6.45/coffee and donut

June 15th/-$78.90/ car insurance

Tomorrow we will look at examining where Sally’s money went in a 7 day span.

  • Is she in the red or the black?
  • Did she under or over spend?
  • What hasn’t Sally paid this month?
  • Where has Sally’s money gone- what did she spend money on?
  • What were Sally’s needs vs. wants?
  • What patterns do you see?
  • How could Sally save money?

Financial Management Tip Day 2: Why is it Important to pay your bills on time?

Financial Management Tip Day 2: The importance of paying your bills on time

Simplify your bill paying and never pay a bill late again. Why is it important to pay your bills on time? Late bill payments will cost you –interest and late charges that quickly add up. Not to mention your credit rating and credit score are greatly affected by late payments on your bills and debt.

First off, get organized (find all your bills and keep them in one place). If you still write checks for your bills, gather all needed supplies (checks, stamps, envelopes, check book, etc) and keep them all together in one place.

Designate a day for paying bills (for ex. maybe 2 times a month after bi-weekly pay cheques -the 15th and at the end of the month or even once a week on Saturday or Sunday).

If you are married, make sure both people know where the bills are, the amount due and due dates, the account logins and passwords, in case of an emergency. It is also useful for making sure both people have some control over the money and understand where the money is going.

I developed a simple Excel spreadsheet to track our bills. Its very simple and easy to do. I put three months on one page.

3 columns (1. due date, 2. amount due, and 3. paid/date and amount). The rows list all our bills and account numbers (power, cell phones, rent, insurance etc.)

Anytime we get a bill either electronically or in paper, we take out our sheet and update it with the due date and amount due.

Once a week either on Saturday or Sunday, we go and pay our bills.

Try to implement a new system for paying bills but remember keep it simple, easy and quick so you can keep up with this habit and say good-bye to late charges.

Financial Management Tip Day 1: Need to save money? Start by getting your finances organized

Financial Management Tip Day 1: Get your finances organized in order to save money

If I asked you right now, could you find your last power bill or a copy of your latest credit card statement? When is the last time you ordered a copy of your credit report?

Despite living in a world where so much of our lives is automated and can be done on the computer, we all still deal with paperwork and mail. It’s time to get organized.

If you still get paper copies of your bills and statements you need to organize this information in one central location.

Although, many bills and statements are accessible online- keep track of how much is due and when. Make sure you don’t just read an email copy or reminder and forget to actually deal with it.

So I guess the challenge has 3 steps to start:

1. Gather all paperwork (decide what can be tossed or what needs to be kept). Sort it into like piles

2. Buy or use previously bought supplies -file folders, a filing box or cabinet, a fire safe for important documents, labels, just to name a few. This doesn’t have to be expensive.

3. Set up a bill payment calendar or spreadsheet so that you never make another late payment, miss paying a bill, or bounce a payment due to poor planning.