Wants vs. Needs: How to Balance Spending and Saving Without Feeling Deprived

Balancing spending and saving can feel like walking a tightrope. Too much focus on saving, and you might feel like you’re missing out on life. Too much spending, and your financial goals may slip further and further away. The key to harmony lies in understanding the difference between wants and needs and crafting a strategy that allows for both. Let’s explore how to strike this balance without feeling deprived.

Defining Wants vs. Needs

At its core, a “need” is something essential for survival and basic well-being. These include housing, food, transportation, utilities, and medical care. “Wants,” on the other hand, are non-essential items or experiences that enhance enjoyment or convenience—think dining out, vacations, entertainment, and that latest gadget.

While this distinction seems straightforward, the lines often blur. For example, while food is a need, ordering takeout or dining at a fancy restaurant falls under a want. Recognizing these nuances is the first step to creating a balanced financial plan.

1. Audit Your Spending

Start by tracking your expenses for a month. Categorize each expense as a want or a need. Be honest with yourself! This exercise helps you see where your money is going and identify areas where you may be overspending on wants.

2. Prioritize Your Needs

Once you’ve identified your needs, ensure they’re adequately covered in your budget. This means setting aside money for rent, utilities, groceries, and other essentials before allocating funds elsewhere. Use tools like the 50/30/20 rule, which suggests:

• 50% of your income for needs

• 30% for wants

• 20% for savings and debt repayment

3. Budget for Guilt-Free Spending

Deprivation leads to burnout. To avoid this, create a budget that includes room for discretionary spending. Knowing you have money set aside for fun allows you to enjoy your wants without guilt or derailing your savings goals.

4. Automate Savings

Set up automatic transfers to your savings or investment accounts. Treat your savings as a non-negotiable “need” to ensure you’re consistently working toward your financial goals. Automating this process removes the temptation to spend money earmarked for savings.

5. Celebrate Small Wins

Acknowledging progress is crucial for staying motivated. Celebrate milestones like paying off debt, reaching a savings goal, or sticking to your budget for a month. Rewarding yourself (within reason) reinforces positive habits and makes the journey more enjoyable.

Conclusion

Balancing wants and needs is not about strict denial or indulgent spending; it’s about creating a plan that honors your goals and values. By auditing your expenses, prioritizing needs, budgeting for wants, and automating savings, you can enjoy a fulfilling life today while securing your financial future. Remember, it’s not about perfection but progress—so give yourself grace as you navigate this journey toward financial well-being.

Savings - A Vehicle To Accomplish Your Dreams

What is margin? How does it relate to savings?

Margin allows you to create space within your financial life to weather unexpected challenges and seize future opportunities without compromising your relationship or your dreams. Creating margin through savings can give you the ability to accomplish your dreams freely! 

There are two types of margin you should have in place: 

1. Cash On Hand Savings (Financial Reserves)

2. Monthly Savings (Operational Margin)

1.  Cash On Hand Savings (Financial Reserves)

Having money set aside in savings is the foundation for financial security. It enables you to focus on your goals and aspirations without constantly worrying about making ends meet. Financial reserves allow you to contemplate and invest in your future, whether that involves buying a home, starting a business, or embarking on exciting adventures. It's like having a safety net that ensures you can handle unexpected expenses without strain. In short, cash on hand allows you to sleep a lot better at night!

GOAL: Aim to have at least three months' worth of operating expenses saved in your emergency fund. This ensures you can navigate through challenging times without jeopardizing your financial stability.

2.  Monthly Savings (Operational Margin)

Operational margin for couples is all about managing your expenses in a way that allows you to consistently save money each month. Having a surplus of funds each month not only ensures that your current bills are covered without depleting your financial reserves but also paves the way for realizing your dreams.

GOAL: Strive for a 15 to 20-percent profit margin in your budget. This margin will enable you to start funding your cash-on-hand savings and accelerate your journey toward achieving your dreams.

Accomplishing Your Dreams Through Margin:

Through the margin created by savings, you will be able to experience: 

• Financial Freedom: Savings creates a financial safety net that allows you to pursue your dreams with confidence. Whether it's starting a business, starting a family, taking a dream vacation, or investing in further education, having savings provides you with the freedom to turn your dreams into reality.

• Reduced Stress: Savings also eases the financial stress that can strain a daily life. With surplus funds each month, you can focus on financially thriving and making plans for the future, rather than worrying about making ends meet.

• Shared Goals: When you work to maintain and build your savings, you'll naturally identify your dreams and aspirations, creating a defined vision for your future.

• Flexibility: Whether you decide to change careers, relocate, or pursue a new passion, having margin in your finances ensures you have the resources to make those choices without hesitation.

By prioritizing savings, you can create a solid financial foundation that gives you the freedom to accomplish your dreams. So, where are you on this journey toward financial margin, and what dreams will you pursue? Remember, savings is your vehicle to accomplish your dreams!