Everywhere we turn, advertisements encourage us to spend our money on a variety of things: a flashy car, designer jeans, or the newest gadget. We are constantly pressured to spend our cash rather than save it. Before signing on the dotted line, take a step back and ask yourself if the slick car, the dazzling jeans, or the cool gadget is something you want or something you need. Chances are it is something you want, but not necessarily something you need. Understanding how to distinguish between wants and needs means the difference between financial stability and living paycheck to paycheck.
We can easily find ourselves consistently making unnecessary purchases. Consider your daily trip to your local Dunkin' Donuts, a medium coffee or latte and a bagel with cream cheese, typically $5. After a year of these daily trips, you will have spent over $1,800. By replacing your daily trip to Dunkin' with a Keurig, a year's worth of K-cups, and a package of English muffins every week you would spend roughly $500 annually, a savings of approximately $1,300. Looking back at your year of daily trips to Dunkin' Donuts, did you need to spend that extra $1,300 or did you want to? For most of us, we need that extra $1,300 in our savings as opposed to an empty coffee cup and bagel wrapper in our garbage.
I have been encouraging my clients to create a budget, write down all of your fixed monthly expenses in comparison to your monthly income and monitor your spending habits for the month. In some cases it can be very reassuring, in others, it can be eye-opening. See if you can find unnecessary purchases that can be cut back in order to increase your savings. By mapping out your monthly budget and evaluating your spending in terms of needs vs. wants will allow you to build a strong financial foundation, and ultimately allow you to sleep better at night.
Ethan Wade, Financial Advisor
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).