1 Budgeting hack that changed my finances
Budgeting and saving money can be a daunting task for many, but it doesn’t have to be! One key to successful budgeting and saving, is to understand the different types of expenses you have and prioritise them accordingly. Recently, I created a new budgeting feature for my budget tracker that has revolutionised the way I save money. I added the ability to categorise my expenses into four categories: Must Have, Should Have, Nice to Have, and Unnecessary. Since implementing this feature, I have been able to save more money than ever before!
Must Have
Let’s start with the Must Have category. These are expenses that are absolutely essential for survival and well-being. Examples of Must Have expenses include, rent or mortgage payments, groceries, and medical bills. These are expenses that you can’t avoid and must be a priority when budgeting.
Should Have
Next is the Should Have category. These are expenses that are important, and that would impact you negatively if pushed off. Examples of Should Have expenses include, insurance, retirement savings, a reasonable amount of debt repayment, and also self-development activities (courses and conferences relevant to your career). These expenses should be budgeted for and prioritised, but there may be room for some flexibility depending on your individual circumstances.
Nice to Have
The Nice to Have category includes expenses that are desirable but not necessarily essential. Examples of Nice to Have expenses include, dining out, entertainment, and vacations. These expenses should be budgeted for, but can be reduced if necessary. I would not recommend eliminating Nice to Have expenses from your budget. When budgeting, I like to make space for some of these expenses because they usually contribute to my wellbeing and happiness.
Unnecessary
Finally, there are the Unnecessary expenses. These are expenses that you can live without and are often impulse purchases. Examples of Unnecessary expenses include buying branded clothes, buying expensive accessories /gadgets because they are popular online, and shopping unnecessary items. These expenses should be avoided as much as possible and can be cut from your budget without affecting your overall well-being.
What next?
By categorising my expenses in this way, I have been able to better understand my spending habits and make informed decisions about where to allocate my money. I have been able to prioritise my Must Have and Should Have expenses, while also being mindful of my Nice to Have and Unnecessary expenses. This has allowed me to save more money than ever before, and I have been able to put more money towards things that truly mattered to me.
If you’re looking for a budgeting tool that can help you save more money, consider the ones with a feature that allows you to categorise your expenses into Must Have, Should Have, Nice to Have, and Unnecessary categories. If you want to use the one I designed, you can purchase it on my online shop FinancesByFederico — Etsy UK.
This write-up serves informational purposes only. It should not be considered explicit financial or legal advice. Not all information will be accurate. Before making any serious financial decisions, consult a professional.
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