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Spend where it is needed most!

Spend where it is needed most!

Today I thought let me slightly deviate from my traditional approach and pen down something which relates to spending of your money. However, in my opinion whenever I have talked about savings and investment, a due consideration to the term ‘spending’ was always given. It goes without saying that the quantum of disposable surplus [i.e. income minus expenses] for any human being is directly dependent of one’s spending.

Conscious spending on our part will generate a positive disposable surplus, whereas reckless spending will drive us towards a net deficit, which leaves no room for any savings. Therefore, spending forms an integral part of one’s financial planning and a lot depends on how one is able to handle the spending transaction, which is one of the most prevalent financial transactions of the modern world.

On the face of it, everything looks very simple however the aftereffects of a spending transaction could be very painful, if one is not watchful when he/ she was busy spending one’s hard earned money. This is where our today’s lesson stands loud and clear by stating – “spend where it is needed most”. Do we really need a lecture from someone as to how one must spend his/her money?

For sure not, but there are many important elements which we tend to ignore while spending our hard earned money, and this is where we normally falter. Through our today’s topic we would delve upon certain key parameters which deserve for our attention, whenever we decide to put our hands into the purse to spend.

The first and most important step in this direction is to “prioritize your expenses”. In times of recession we are faced with some tough financial decisions. In order to make informed choices, you need to take stock of all aspects of your financial picture, learn to prioritize your bills and expenses, and adjust accordingly.

Prioritizing your expenses is a key component to conquering your debt; it will give you an opportunity to really examine your spending habits and figure out what’s truly important and what isn’t. Figuring out which bills need to be paid first and why, and which obligations can be eliminated or postponed for the time being. This exercise will help you to create a plan
for surviving during tough financial times.

You may even come out on the other side of this recession in better shape than before! Finding out where your money goes is an important element in this process. So you will need to take note of all your probable expenses and then prioritise the outlined expenses, based on your needs. Without undertaking this exercise, you may end up spending majority of your money where it wasn’t needed the most.

For example, at any given point in time any parent must invariably pay school fee of his/her little loved ones over and above any other expense at that time. This is what we call noncompromising expenses, even one’s medical expenses also fall into the same category. Thus, it is important to first examine your spending pattern and payment habits to decide how you spend your hard-earned money.

You can start this by retrieving your bank or credit card statements for the past one-year and then jot down the expenditure category, where you incline to spend the most and then lastly end it with your optional expenses. By doing this simple exercise you would be wiser in determining the most optimal spending pattern, going forward.

In actuality, we only need four things to survive: (1) a roof over our head; (2) enough food and water to maintain our health; (3) basic health care and hygiene products; and (4) clothing (just what one needs to remain comfortable and appropriately dressed). Everything that goes beyond this [e.g. a big house, branded clothes, fancy watch, swanky mobile phone, a new car, etc.] is a clear example of “wants” and not needs.

Does that mean that you should only buy the things that you need? Not at all!! Life is meant to be lived, not survived. Treat yourself to some wants along the way, but do so when you can afford to and enjoy those wants as the extras that they are. Let’s accept the reality. Most people spend way too much money on things they don’t really need. The more money we make, the more we tend to spend.

This endless cycle of materialism has led many people to confuse the word “need” with “want.” Thus the call of the hour is to make a clear demarcation between one’s needs and wants. Strive hard to first fulfil your needs and then only turn to your wants, if at all there is a need to do so, because you must spend only where it is needed most and not otherwise!!!

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Author: Sagjit Singh

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