Spending 101
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Spending 101
This starts the story of Joy, who has always struggled to make all of her payments on time! She has a full-time job, but just can’t get her spending under budget.
After the conversation she had with her little sister Clarissa, she is determined to make the most of the money she makes!
So, to get started Joy knew she had to reach out to someone that had done this budget thing right before.
The only person she really admired for how they managed their money was her great friend Pearl. As someone who always has money saved for holidays, and is comfortable to say no when asked to join in on nights out, Joy had a feeling that Pearl would have all of the answers she needed.
Joy asked Pearl out for a coffee date, and explained what she was hoping to do over the next year to really making her money last. Pearl was more than happy to help, and jumped straight into the basics that Joy was clearly missing.
The gracious Pearl asked a question to Joy, “Do you understand the difference between what is a need and what is a want?”. Joy shook her head and waited for the answer. Pearl then went on to explain, “Your needs are things you should spend your money on first. Things such as food, water, electricity, accommodation, and transportation. Food refers to groceries, not restaurants and take-aways! This also includes any payments to your creditors, such as a car loan, store accounts, cell phone provider, internet provider etc. Then the last part of your needs are your debit orders, such as medical aid, insurances, schooling etc.”
These would all be considered your needs, so what can we include under wants?
This section will include anything else you spend your money on such as purchases or even subscriptions. Things like hair or beauty salon treatments, car washes, take-aways, Netflix, gym, coffees, movies, and anything else you don’t really need to survive.
Pearl got out a pen and paper and made some notes for Joy. The easiest way to check this is with your monthly bank statements. Get the most recent monthly statements from your bank and highlight all of the non-essential expenses. Once you add them all up, this will give you an idea of how much money is being used on unimportant things. Cutting out this non-essential spending feels the same as giving yourself a raise.
Pearl then took Joy’s hand and said, “This is only possible if you have a good reason for wanting to be better with your money. You need something to really motivate you every month when it gets hard not to spend your money and go out with friends. Each person’s answer will be different. You might want to travel the world, own a business, buy your own home, save up for a wedding, or even retire your parents.
Your “why” needs to be a strong enough motivator to enable you to say no to the things which are not in line with your goals.”
Joy was so grateful for this advice, she immediately went home to start her research.
Continue with your lesson to find out what happens with Joy…
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