Have you ever made a significant purchase and immediately questioned whether it was a good idea? Have you been out with friends and spent a significant amount on a dinner and then woke up the next morning wondering how you will make ends meet for the rest of the month? Understanding the difference between needs and wants, implementing a budget and setting SMART goals for yourself will help provide you the financial resources to make wiser decisions and avoid buyer’s remorse.
A need is a necessity of life – we all need shelter, food, clothing and transportation for employment purposes. A want is something you would like to have but could live without. When implementing a budget, you should first ensure your needs are met. Your wants are secondary and can be saved for in your goals.
A budget is a spending plan based on income and expenses. Tracking all of your expenses for a couple of months will allow you to understand the cost of your basic needs and then set a budget as to how you would like to allocate excess funds for “wants” and savings.
A goal is what you want to achieve. If you would like to attend a concert or go on a trip with your friends, setting a goal to set aside funds in your budget will allow you to save to reach your goal.
To assist you in reaching your goal, they should be SMART goals:
Specific – what you want to save the funds for
Measurable – a set amount
Achievable – you can afford the monthly amount
Relevant – important to you
Time Bound – set time frame for you to achieve the goal
Implementing the above financial habits will allow you to enjoy a purchase you have budgeted and saved for and avoid buyer’s remorse.
Please feel free to reach out to us for a free consultation or refer to the Office of the Superintendent of Bankruptcy website at https://ised-isde.canada.ca/site/office-superintendent-bankruptcy/en/you-owe-money/you-owe-money-consumer-proposals for more information.
By Kathy Lenart – Insolvency Partner, Licensed Insolvency Trustee
CPA, CA, CIRP
Canadian Association of Insolvency and Restructuring Professionals (CAIRP)
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