When creating a personal budget or spending plan, many people fail to consider their spending priorities. Yes, you need to list all of your income, and list your expenses. This is important information. But, once you know what you are spending your money on, it’s not enough to just acknowledge it. You should do something about it.
Decide What’s Important to You
As you create your budget, look at what you have been spending money on. Have you been spending money on things that are important to you? Is your spending prioritized so that the items you value most are more likely to be funded each month? An important part of feeling good about your budget is making sure that your spending matches your priorities.
Take a look at your spending habits, and identify the items that are most important to you, and the items that are least important to you. This also includes considering your long-term goals. Is it important to you to retire early? If so, you need to take an honest look at your budget and your spending habits and determine whether or not you are using your money in a way that will result in an early retirement.
Go through your list of financial goals, and consider your spending. If you are using your money in a way that doesn’t advance your most important goals, your spending doesn’t match your priorities. Identify the items that are holding you back, and address them. This might mean paying down debt as quickly as you can so that your financial resources are freed up, or it might mean cutting out frivolous purchases that you don’t actually care much about.
Direct Your Resources to the Important Things
Now that you know what is important to you, it’s time to direct your resources toward those things. Clearly, some items, such as bills, insurance, housing costs, and grocery costs, need to be taken care of first. Look at some of your other spending, though. If you think it’s important for your child to participate in extracurricular activities, the priority should be making sure those items are funded, and moving entertainment costs to the bottom of the list.
Indeed, making a list is a good idea. Create a list of items that should be covered first in your budget or spending plan. Fund those items, in order, before you designate money for items further down on the list. That way, if you run out of money before you run out of expenses, the least important items are those things on the chopping block, rather than the most important items.
Feel Better about Your Spending
When you feel like you don’t have the money to do the things that are more important to you, you are more likely to feel discontented with your situation. On the other hand, if you prioritize your spending so the most important things are covered first, you are more likely to feel good about your situation. Honestly evaluate your situation, and create your priorities. Then, start spending in a way that reflect what’s important to you. Your money will be better used, and you’ll feel better about your financial situation.