It’s important for your financial health to identify which of your expenses are needs and which are wants. It can be easy to think of everything we want as things we need: we need an internet connection; we need a car. In certain cases, this may be true. Usually though, we probably only need these things to maintain our current lifestyle. However, that doesn’t make the things we want things we need.
Take a look at your expenses and separate them into two lists: needs and wants. Be as honest as possible. For example, it might be hard to imagine not having a broadband connection at home but do you actually need it?
Once you have your list of wants, rank them in the order of importance. Consider how difficult it would be to give these things up or live without them. Don’t worry: just because it’s a “want” doesn’t necessarily mean you have to cut it out of your life. However, it does mean you should be open to that possibility should the need occur.
When money gets tight, you’ll need to cut expenses. You can’t deny yourself the things you need; you have to dump the things on your want list. By prioritizing the items on your want list ahead of time, deciding which expenses to drop should be easier.