In today’s economic times many of us are having to cut back. We may still want a brand new SUV, the latest iPhone or an exotic vacation getaway, but acquiring these things all at the same time may no longer be realistic. That does not mean we have to feel deprived or impoverished. It simply means that we need to prioritize how we spend our money.
The average household spends approximately 30% on housing costs, 30% on food and transportation costs and the other 40% on personal expenditures like entertainment, debt, savings, health care, goods and services. However, every household is different and may have to prioritize their spending based on their circumstances.
For example, if you are in a lot of debt or have high health care costs, then you may need to spend less in the other areas. You may have to live in a less expensive home or drive a cheaper car or reduce your shopping until these costs go down. It doesn’t mean you will not be able to afford nicer things in the future.
On the other hand, spending money only on things we need and never on things we want can also be unrealistic and especially hard to keep up in the long term. Set aside part of your income to save up for a luxury that you really want. Shall it be a weekend at the beach, a Blue-Ray player or a pair of fancy black boots? Pick the thing that matters to you most and keep the rest of your wants on a list for the future. There’s a good chance you will appreciate and enjoy your purchase a lot more since you put so much thought and effort into getting it.
Here are a few tips that can help:
- Find a way to track your spending on a weekly basis, so you can make sure you are sticking to your priorities.
- Avoid situations where you are likely to overspend, like accompanying your girlfriends to the mall or going out with co-workers after work.
- Find less expensive alternatives, like taking your family to the park instead of to the movies.
- Adopt a prosperous attitude. Think of yourself as rich no matter what your financial circumstances and very soon you will feel that way.
To learn more about how to manage your money, visit our Money Basics topic.