Smart Spending

What do you spend your money on? How happy are you with your spending choices? Do you feel in control of your money? If you’re not satisfied with your answers, following some smart spending fundamentals will make you feel more in control and set you on the path of financial independence.

Know Your Needs and Wants

First, you have to understand the difference between needs and wants.

Needs are things required to live, like shelter, food, transportation, and clothing.

• Make a list of the needs you are responsible to pay for -- such as lunches, school supplies, bus or subway transportation.

Wants are things that would be nice to have, but are not really necessary.

• Make a list of your wants -- going to the movies, eating out, name-brand clothing, video games or cell phone.

Then, prioritize your needs and wants in order of importance. This will help you when you’re ready to make your spending budget.

Learn more about needs and wants.

Needs and Wants Lists

Set Goals

Now that you have your needs and wants prioritized, you can set some goals.

Then, prioritize your needs and wants in order of importance. This will help you when you’re ready to make your spending budget.

• Short term -- like getting a new pair of sneakers
• Long term -- like going to college, buying a game system, new phone or a car

Establishing goals helps you determine what you want and how much money you’ll need. That makes saving money now for use in the future easier.

• If you want to buy a $500 television within the next year, you can plan to save $50 a month for 10 months, which is just $12.50 a week -- not including any interest you could earn on your savings.

Set a Budget

Budgeting is knowing what money you have coming in and keeping tight track of what goes out. A well-designed budget allows you to make the most of your money – get rid of wasteful spending while having the money to pay for expenses that are really important to you.

Pay yourself first. That means put money away into savings. Decide on a certain percentage you will always save before spending anything.

• Try 25% of your weekly income – so if you make $40, save $10.
• Cut back, not out. Are you spending $5 a week on snacks? If you cut back by $1 a week, after a year you’ll have $52 in savings.

Consider charitable giving. You can choose from a variety of charitable organizations such as your local church, synagogue or temple, animal shelters, food pantries, homeless shelters and more. If you want to make charitable giving part of your budget, decide on a percentage of what to give each week.

• Try 2-5% of your weekly income.

Plan the use of the remaining money. Set aside what is required to meet your needs, and then determine how you will spend the rest on your wants.

Track Your Spending

Tracking your expenses makes it clear where your money comes from and where it goes. It may uncover some surprises – especially if you find you have more expenses than income at the end of the week.

Learn more about making and keeping a budget.

Track your own income and expenses using Your Budget Builder.