Objectivity is key in making sure that you’re properly classifying needs and wants. When setting a budget, it’s important to differentiate between what you need and what you want. Indeed, many budgeting systems ask you to assign percentages to your needs and wants. For instance, the 50/30/20 budget popularized by Elizabeth Warren recommends putting 50% of your budget to “needs” and 30% to “wants.”

But what actually constitutes a need or a want? Before you start building a budget, it’s crucial to understand what really fits into each of these categories, and to honestly and objectively evaluate your spending habits. You might also find it helpful to find a financial advisor in your area who can build you a financial plan.

Needs vs. Wants: What’s the Difference?

As you might expect, a need is anything that you genuinely have to have. These are essential things that you cannot go any significant period of time without. Food, shelter, and transportation fall into this category. They are the basics of daily living.

On the other hand, a want is essentially something that enhances your life and that you’d like to have, but that you can get away without having. You should be able to cut wants out of your life without significant or long-term disruption. You might miss dining out, going on vacation or buying new clothes that catch your eye, but you could do without them if you needed to.

These opposing categories are a good starting point for anyone who’s building a budget. But don’t forget that wants and needs may be different for any given individual. For example, a professional who is expected to wear a suit to work every day would consider such formal wear a need, as it’s essential to their career. Conversely, someone who simply likes getting dressed up would consider such clothing expenditures a want.

How to Budget for Needs and Wants

By following the 50-30-20 rule, you can simplify your budget. It states that 50% and 30% of your budget should go towards needs and wants, respectively, with the remaining 20% designated for your savings or to pay off your debt. These limits aren’t exact, but if you find yourself spending too much in any one of them, consider redoing your budget.

It might seem that minimizing your spending on wants is the goal of this philosophy. In reality, though, the objective is to reach a healthier balance within your spending habits. Just because you classify an expense as a want doesn’t mean that you shouldn’t be spending money on it. As long as you’re properly managing your budget, you can meet your needs while still enjoying your wants.

If you find that you aren’t allocating your budget in a healthy way, move things around. Many people find themselves spending too much on unnecessary items and forgoing certain needs on a monthly basis. If that’s the case, you don’t have to give up your wants. Try going on less expensive vacations, or only eating out on certain days of the week.

Finally, make sure that you regularly review your spending and properly allocate money for needs and wants in a budget-healthy way.

Culled from Smartasset.

Your money personality is made up of seven tendencies that identify how you handle money. These tendencies are specific to how we deal with money. You likely lean toward one or the other of each tendency, but don’t overthink it. It’s a spectrum, so you might be somewhere in between.

You’re wired to think and act in certain ways, and while none of the tendencies are right or wrong, they do have implications. Understanding them will help you make faster progress on your financial goals.

1. Spender or Saver

Spenders

They see so many creative possibilities when it comes to money. Whenever they have extra money, it’s burning a hole in their pocket and they can’t wait to spend it. Spenders have a healthy appreciation for spending money, and generosity might come more easily to someone with this money personality type.

Challenge for Spenders: If you’re a spender, you need to prioritize saving too.

Savers

They would rather keep their money tucked away for a rainy day. Putting money away for the future isn’t a huge sacrifice for them. It gives them a sense of security. They’re patient, responsible and willing to wait.

Challenge for Savers: If you save everything you make, you’re going to miss out on a lot of fun experiences that make life worth living.

2. Nerd or Free Spirit

Nerds

They have their tax return prepared for the dreaded April 15 deadline well in advance. Spreadsheets, amortization charts and the budget make them feel in control of their money—which they love. They’re laser-focused on what they need to do to win with money, and they’re on top of the details and decisions.

Challenge for Nerds: If you live and die by the rules and the budget, you end up wearing out yourself and your family.

Free Spirits

Tax Day is when? If this sounds more like you, you’re probably a free spirit. When it comes to money, they have a “let’s enjoy life” mentality. Just reading the word budget would make this money personality break out in hives.

Challenge for Free Spirits: If free spirits aren’t intentional about their money, they’ll look up in a few years and wonder where on earth it all went.

3. Experience or Things People

Experience People

This part of your money personality is all about what you value in life. If you’d rather spend your money on experiences, like travel, concerts or a day at the spa, you’re a person who values experiences. I love experiences, and I prefer to spend my money on eating dinner out or going to a movie rather than anything tangible.

Things People

If you tend to spend money on physical things, like clothes, shoes or the latest piece of technology, then you’re a person who values things. My husband, Winston, is like this, and his Christmas lists have included things like hunting gear and an adult-sized scooter.

Challenge for both: They’re both equally valid preferences. If you’re married, ask your spouse if they’d rather have an experience or a thing. After Winston and I figured this out, it helped us in our budgeting, gift-giving and communication.

4. Quality or Quantity

Quality People

This money personality type wants things that are going to last longer. I find that people who value quality will research and plan their purchases beforehand. Quality spenders don’t tend to be impulse shoppers.

Challenge for Quality People: Ask yourself if it’s really necessary to spend more, or if there’s a less expensive option you would enjoy just as much.

Quantity People

They enjoy the creativity and possibility that variety offers. You like having ten options versus going back to the same thing over and over. People who lean toward quantity are often great bargain shoppers. They pride themselves on the art of a great deal.

Challenge for Quantity People: If you struggle with overdoing it on quantity, consider taking the Minimalists’ challenge to give you a different perspective.

5. Safety or Status

Safety People

People who value safety as part of their money personality want the security that money can bring. They want to know they can withstand job loss, a medical emergency or even just a dip in income.

Challenge for Safety People: Don’t let a safety mindset keep you living in fear. As you make money decisions, make sure you’re seeing and considering all of the possibilities, not just defaulting to the choice with the least amount of risk.

Status People

Someone with this kind of money personality is more likely to value a name-brand purse or luxury vacation. They’re also more likely to find a way to justify a larger purchase if, on some level, it makes them feel seen as successful.

Challenge for Status People: Knowing that you have that status tendency means you’ve got to keep your spending and your heart in check. The stuff you own doesn’t define you as a person.

6. Abundance or Scarcity

Abundance People

People who live in an abundance mindset believe there’s always more than enough for everyone. They tend to take more risks and don’t fear the outcome of a decision. They also tend to be natural givers, believing there will always be a way to make more money!

Challenge for Abundance People: This glass-half-full mentality can interfere with making wise choices with money. If this is you, seek the advice of family and friends you trust before making a big purchase (even if it’s for someone else).

Scarcity People

People who operate under the assumption of scarcity make money decisions based on a belief that resources are finite. They hold onto possessions tightly because they “might need that someday.” And sometimes they fear losing things because they might not be able to replace them.

Challenge for Scarcity People: Don’t miss smart financial opportunities that will move you forward in life because fear is undermining your thinking. Always remember this: God will provide for you. There are no limits to his goodness and ability.

7. Spontaneous Giver or Planned Giver

Spontaneous Givers

People with this tendency in their money personality are quick to give. If they pass someone on the sidewalk asking for a donation, they jump at the chance. They love having the freedom to respond with their heart.

Challenge for Spontaneous Givers: Dropping $5 in a bucket here and there can feel good in the moment, but it may not have the impact you think it does. Emotional giving definitely isn’t wrong—just remember that if it’s the only way you give, you may miss opportunities that have larger impact.

Planned Givers

Typically, planned givers take their resources and money very seriously. They don’t give to every good cause they hear about because they’ve already decided where they’re giving, and they’ve committed to it. They also avoid giving to individuals or nonprofits they haven’t researched.

Challenge for Planned Givers: If this is how you’re wired, try to leave room in your giving line item for the unexpected. You might find a lot of joy in blessing someone who isn’t expecting it.

Now that you know your natural tendencies and their challenges, you can make better decisions for yourself and become more balanced. And remember: No part of your money personality is right or wrong—it just shows us how we’re wired.

By RACHEL CRUZE,

Check out her New Book;  Know Yourself, Know Your Money

Culled from: https://www.daveramsey.com/