Happy Money Monday!

This week I just wanted to briefly start talking about budgeting. There will be follow-up posts on this subject, but I wanted to bring up the core elements of a budget, prioritizing the essential Needs.

Food, utilities, shelter, transportation. These categories come in priority over non-essential luxuries in your budget. Before any other spending is considered, these need to be covered first. While that might sound obvious, many people don’t realize their excess spending and then might come up short on the important stuff needed to live.

Food can be both a necessity as well as a luxury. The necessity means you have food on the table, where luxuries can be frequenting restaurants, delivery services, organics and pricier foods, etc. The basic idea here is that if you can’t afford to budget more than a certain amount toward food a month, the last thing you should be doing is ordering in. Knowing how to cook is also a good skill here, as groceries are far cheaper than buying meals.

Utilities is more vague here. Water, electricity, telephone, internet, etc. Some may be more needed than others. You can survive without internet, but you cannot without water. You can sometimes be frugal with your usage to save costs, such as not keeping faucets running, turning lights and devices off when you aren’t using them, and so on.

Shelter is more of a catch-22, as many rent, others own. It’s typically recommended never to spend more than 33% of your pre-tax paycheck on housing. Owning can be more cost effective than renting, though you need to maintain everything yourself. If you can’t afford a house or mortgage, you are typically stuck renting.

Transportation is another tricky one. If you own a vehicle, this includes maintenance, having insurance, fuel access, loans and leases, government registrations and emissions etc. Public transportation is generally more cost effective but lacks the conveniences of having your own car. Luxuries here would be owning expensive vehicles, Taxi/Uber/Lyft use.

No one wants to be stuck in long-term debt because they cannot afford the essentials due to excess spending or emergencies. It’s important to know exactly what you need to set aside before any additional stuff like luxuries, investments, savings, etc. Everything after the basics can come second.