Money management skills on controlling and budgeting haves and needs.

Money management skills and budgeting personal finance.

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Money Management Part 4

HAVE to have that!

How many times have you thought that?  If you’re like most people, it’s a thought that creeps into your mind, and now that you’re an adult, you likely have more money that can be put toward those things you want.  When you were younger, your parents probably paid for your needs: shelter, food, clothing, and transportation.  So what you “needed” as a young person—or what you thought you needed—designer clothes, music, movie tickets, or other entertainment, turns out to be less about needs and more about wants.  Interestingly, three-quarters of the money spent by adolescents is for items that adults say they can live without.

Non-essential Spending

If you consider everything except those items required to live and work, those purchases really are non-essential and fall into WANTS, not NEEDS.  It may be difficult to imagine life without your cell phone or the movie channel, but you will survive.  To effectively manage your money and time, you must understand the difference between wants (optional) and needs (requirements).

As you segregate items in your life into the non-essential category, you’ll most likely be surprised at what you can live without.  As an exercise, review the list below, and determine which items are Wants (0) and which are Needs (1) by placing a zero (0) or one (1) beside each.

Now, add the numbers together from those placed beside each item.  Your total should be no greater than five (5).  Are you shocked?  Many people are, but the truth is that we can live without most of the items in our lives. 

One of the most difficult skills you will learn here is how to live without the non-essential items in your life, but you must learn to resist the temptation to purchase those items you don’t truly need if you want to become a successful money manager.  Remember, each time you resist purchasing a non-essential item, that money can go toward an investment that will make money instead of take money.

Confusing Items

Let’s focus for a few moments of an item that can be confusing: clothing.  Most people don’t set aside a specific budget for clothing each month.  However, if you consider the amount of money it may take to purchase a new suit, you may be surprised how much your budget will be set back—unless you use your new money management skills.

The confusion with clothing is the great variance that lies between the prices of thrift stores and designer brands.  Some people enjoy shopping for clothing, and some dislike this activity; no matter what your choice is, you must learn to find clothing that meets your needs without exceeding your budget.

To begin this process, review your clothing purchases over the last year: start with major costs such as suits, overcoats, and the like.  Now, estimate the number of times you end up in a clothing store and make a purchase.  You may be surprised at how much you actually spend.  The bottom line is that although clothing is a necessity, the amount of clothing you purchase, and the price you pay, are up to you!

In the next article in this series, we’ll discuss review other necessities and strategies for reducing their costs

Money Management Part 5

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