How to Create a Budget Based on Your Needs and Wants

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It is always important to differentiate your needs and wants when setting a budget. But how do you create a budget based on your needs and wants? We have a simple guide that will help you in creating a budget that fits your needs and wants.

Determine your Monthly Income

The first step in creating a budget is to determine your monthly income. This should include all the available sources of income including your day job, side hustle, and other extra sources of income. If you have a variable income then use the average.

Identify the Costs of Needs

Needs are expenses that must be met. Needs include housing, food, healthcare, transportation, utilities, savings and debt payments. Subtract the total costs of these items from your monthly income and make sure to set the amount aside all the time.

Identify the Costs of Wants

Wants include subscriptions like Netflix, etc. You should also include the cost of random dinners, trips to the coffee shop, movies and other activities you can actually live without. Total these costs and subtract them to what remains on your total income.

Revise and Make Decisions

When creating a budget based on your needs and wants, there are times where you have to revise and make important decisions. For instance, if you see that the total costs of your needs exceeded your expectations, then you will need to adjust your wants. Or for instance, there’s a sudden financial emergency, there are things you will need to let go.

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