written by: Yolander•edited by: Jason C. Chavis•updated: 11/26/2010
Learn the difference between needs vs. wants in managing your money and setting up a budget.
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There is a lot to be said for understanding the difference between a need vs. a want. In a broken economy, where job losses and credit squeezes run hand-in-hand, managing money between need and wants can mean the difference between survival and bankruptcy - whether you are employed or not.
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After losing your job, the first thing you should do is re-evaluate your spending and separate your expenses into two categories: needs and wants. Needs can be recognized as items and services that you can not survive without. Shelter, food, gasoline or public transportation, insurance, electricity and water are examples of needs.
Needs should not be removed from your monthly spending, but they should be reduced as much as possible until you are employed. There are many ways to reduce your spending on daily necessities.
Your grocery budget can be reduced by up to 30% by using coupons, shopping for sale items, buying store brand merchandise, and planning inexpensive meals. Find even more tips on saving money on groceries.
Gasoline expenses can be reduced by minimizing your driving and driving the speed limit. You can also consider using public transportation instead of your vehicle.
Electricity bills can be reduced by turning off electronics and lights while not in use, hanging clothes to dry, and raising or lowering your thermostat (depending on the season).
Water can be saved and bills reduced by watering your lawn less, turning off the shower while you shave or soap up, washing your car less and washing dishes without the water running.
Insurance costs can be reduced by increasing deductibles. When you have lost a job, you should be careful when considering increasing your deductibles.
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Evaluating and Replacing Wants
Wants can be recognized as items or services that enhance your life, but are not key to survival. Cable, new clothing, cell phones with land lines, internet service, magazine and newspaper subscriptions, lawn maintenance, and dance lessons are all examples of wants.
The unfortunate reality of losing your job is that you must get rid of your wants and find free or almost free substitutes for them. Do not count on getting another income quickly or making your savings last while paying unnecessary bills. There are a lot of options for free or cheap replacement of your wants.
Your local library carries daily newspapers, monthly periodicals, books of all kinds, DVDs, and internet access. All for free! Utilize this while you are unemployed. You can use the library's internet access to find jobs online, take classes online and improve skills within your field.
Your local recreation center or YMCA may offer dance classes and other activities at a greatly reduced price compared to private lessons.
Choose either your cell phone or your land line. If your contract is up with your cell phone company, switch to a prepaid plan. Prepaid plans can cost as little as $7 per month and are perfect for emergencies.
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When evaluating your needs and wants, honesty is vital. It will only hurt you and your family in the long run if you make excuses in order to avoid getting rid of your unnecessary expenses. Attempting to maintain your former lifestyle will add stress to an already overly stressful situation, and do more harm than good.