Need or want? Understanding the essentials of budgeting

t's easy to get caught up in the moment and spend money on things that seem fun or cool in the moment. However, it's important to remember that every financial decision we make has consequences and can impact our future.

Let’s start talking about budgeting

Budgeting is a simple concept, but it can be challenging to implement. Essentially, budgeting involves creating a plan for how you'll spend your money. You can create a budget for a day, a week, a month, or even a year. The key is to have a plan for how you'll allocate your funds so you don't end up overspending or running out of money.

Differentiating between need and want

One of the most critical aspects of budgeting is learning the difference between needs and wants. Needs are the things we require to survive, such as food, shelter, and clothing. Wants, on the other hand, are the things we desire but don't necessarily need. Examples of wants include the latest smartphone, a new gaming console, dining out at fancy restaurants, or designer clothes.

By understanding the difference between needs and wants, teenagers can make more informed financial decisions. By prioritizing needs over wants, you can avoid overspending and ensure you have enough money to cover essential expenses. For example, if you need to buy new clothes for school, it's essential to prioritize that expense over buying the latest smartphone.

Examples of needs and wants

1. Transportation: A car or a bicycle might be a need for a teen who lives in an area with limited public transportation. However, a luxury sports car or a bike with high-end features would be a want.
2. Entertainment: Watching movies or TV shows can be a want. However, a subscription to a streaming service might be considered a need if it provides access to educational or career-related content.
3. Food: Basic groceries like fruits, vegetables, and whole grains are needs. On the other hand, dining out at fancy restaurants or buying expensive coffee drinks are wants.
4. Housing: Rent or mortgage payments are needs. However, a large house or a luxurious apartment might be considered a want.

In conclusion, budgeting is a critical skill to learn. By understanding the difference between needs and wants, you can make informed financial decisions that will benefit them throughout their lives. With practice and discipline, budgeting can become a habit that will help you manage your finances effectively and achieve their financial goals.