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How to Budget: Necessary Vs. Unnecessary Expenses

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Have some financial goals to meet this year? Want to check in on your financial health? We’re here to help your bank account!

Let’s face it, we all have expenses. However, what are we required to pay each month expense wise and what do we choose to pay?  Often people continue to add to their monthly expenses and don’t realize that they could avoid some of the debt and recurring charges if they think through their choices a bit.

Necessary Vs. Unnecessary Expenses

Basically, there are two different categories when it comes to expenses: the necessary kind and the unnecessary kind. The goal is to nip the ones you don’t need so that you can pay for those you must in a timely way.

The results? Actually seeing how much money you are spending and where it’s going! If your goals include setting up an emergency fund, increasing your savings account, achieving financial freedom, or just checking your spending habits, this will help!

necessary vs. unnecessary expenses - Splendry

What is an expense?

To define, an expense is simply a cost or charge.  We can often control the expenses that we owe.  If we’ve already made choices where our expenses are higher than they should be, then there is hope if you pursue a change in behavior. Everyone has to have food to eat and a place to live. However, you can choose wisely and within your budget so that those everyday expenses are affordable for your household.

Necessary Expenses

We all have to have a few necessities in life. The choice of what we spend on them depends on our decisions and how strapped we want to be budget wise.

The following are financial obligations that are a must – the necessary expenses:

  • Utilities – the monthly bills for things like electricity, water, or gas)
  • Groceries
  • Clothing
  • Rent or Mortgage Payments
  • Health insurance
  • Car payments or expenses that come with a vehicle (car insurance, etc.)

While we can’t ignore these expenses, we can decide to live within our means and be sure that the amount we owe each month doesn’t exceed what we bring in. 

Unnecessary Expenses

See below for potentially unnecessary expenses (sometimes called discretionary expenses):

  • Memberships, Subscriptions, Lessons (gym membership, Netflix subscription, magazines, and piano lessons, for example)
  • Cable TV and internet (They truly aren’t required to live! Perhaps you could limit the package and channels or internet speed to shave off a few dollars per month. It’s worth calling your service providers to find out!)
  • Services (car washes, lawn care, haircuts – can all be done “in house!”)
  • Excessive high payments (consider downsizing your home or sell a high priced car and get something cheaper, interest from credit cards, etc.)
  • Entertainment (fast food, movie tickets, streaming services, trips to the coffee shop,)
  • Shopping (while fun, not necessary…especially if you are in debt.)

Taking a close look at where your money is going may be an eye-opener!

It’s important to focus on the necessary expenses first.  Often, people feel that’s not the most enjoyable way to do things and they get themselves behind with unnecessary spending and credit card debt and just continue to struggle.

Debt-free living is amazing and more attainable than people realize. It just takes a bit of work and effort on a regular basis. Imagine having a burden that is being lifted off of your shoulders. The unnecessary costs can truly wait!  Get yourself ahead and then resume some of the extras that we all enjoy in life when you have paid down some debt or gotten your finances under control.

Here are a few more unnecessary expenses you may not initially think of: 

  1. Convenience Fees: Paying extra for convenience, such as expedited shipping or convenience charges for online transactions, can add up quickly. Opting for standard shipping or choosing non-fee payment methods can help save money.
  2. Impulse Purchases: Making impulse purchases on items that you don’t really need or haven’t budgeted for can lead to unnecessary spending. Practice mindfulness when shopping and avoid impulse buys by sticking to a shopping list.
  3. Brand Loyalty: Being loyal to specific brands or paying premium prices for name-brand products when comparable generic or store-brand alternatives are available can inflate your expenses unnecessarily.
  4. ATM Fees: Withdrawing cash from ATMs that are out-of-network or charging withdrawal fees can eat into your budget over time. Plan ahead and use ATMs that are affiliated with your bank to avoid these fees.
  5. Extended Warranties: Purchasing extended warranties for products that already come with a manufacturer’s warranty or have a low likelihood of needing repairs may be an unnecessary expense. Evaluate whether the additional coverage is worth the cost.
  6. Overpriced Convenience Foods: Buying pre-packaged convenience foods or prepared meals at convenience stores or fast-food outlets can be more expensive than cooking meals at home from scratch. Plan meals, grocery shop strategically, and prepare homemade meals to save money.
  7. Excessive Data Plans: Subscribing to data plans with more data than you actually use on your phone or internet service can result in paying for features that you don’t need. Evaluate your usage patterns and adjust your plan accordingly to save money.
  8. Annual Fees: Credit cards, bank accounts, or memberships that charge annual fees may not always provide enough benefits to justify the cost. Review the terms and benefits of these services and consider switching to fee-free alternatives if possible.

Being mindful of these often overlooked expenses can help you identify areas where you can cut back and save more money in the long run.

There are so many things that I’d like to do or buy; however, my first step is to consult my monthly budget before I purchase things that are outside our family’s financial plans and goals.

If I have the extra money to spend then I will do it; however, if we don’t then I will hold off.  Instant gratification can lead to a financial struggle later.  Planning and a budget will help keep you on track in the long run!

Today, I just encourage you to focus on the necessary expenses and think differently about the unnecessary ones. In the event that you have any debt or feel behind on bills, then you can try and brainstorm ways to get yourself ahead rather than stay behind.  Often people cannot see the end to the difficult paycheck to paycheck cycle. However, there is freedom in working to change and in time, you’ll see the fruits of your labor.

Understanding the distinction between necessary and unnecessary expenses is crucial for achieving financial stability and reaching your goals. By prioritizing essential expenses and cutting back on discretionary spending, you can take control of your finances and pave the way towards a debt-free and fulfilling life.

Remember, financial freedom is within reach with careful planning and disciplined decision-making. So, take the first step today by evaluating your expenses, making necessary adjustments, and committing to a budget that aligns with your financial aspirations. With dedication and perseverance, you’ll soon experience the liberating rewards. Here’s to a brighter and more secure financial future ahead!

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