Family Budget: Financial Needs vs. Wants

Bottled water, lattes, that low-fat blueberry muffin—no matter what your tiny vice is, cutting back on it will help you save. Understanding the difference between your needs and wants is a vital part of saving money.

To get started, make a list with two columns—Needs and Wants—and think very carefully before writing down items in each category. Decide if you could survive without this or that. Chances are, you can and will. I call this getting a grip on the drip of a leaky, "Where does my money go?" financial faucet.

Another way to think about this list is through fixed vs. flexible expenses. Some bills are the same every month, like rent or mortgage (fixed); while others such as dry cleaning, lunches and gifts, change (flexible).

Fixed monthly expenses:

• Rent/mortgage
• Electric/gas bill
• Heating/AC bill
• Water bill
• Land-line phone service
• Cell phone service
• Web access
• Transportation: car payments, gas, tolls
• Student loans
• Credit cards
• Health insurance
  
  TOTAL =

Flexible monthly expenses:

• Breakfast/coffee
• Lunches
• Dinner out
• Groceries
• Taxis
• Music/books/magazines
• Movies/DVDs
• Dry cleaning/laundry
• Drugstore/cosmetics
• Clothes/shoes/accessories
• Pets/hobbies
  
  TOTAL =

Divide each total by 4 for a weekly total.

Don't get weighed down by wants. If you cut back on a couple of $3.50 lattes a week, for example, you'll have an additional $35 or more a month.

Get more financial advice from our personal finance expert, Carmen Wong Ulrich!