What I did if figure out what I needed for the basics: rent, utilities, insurance, gas, food/hba/household products etc. I also save monthly for things like Christmas, birthday presents, clothing and car maintenance. Then I looked at what was left and decided what should go to savings and the rest of debt reduction. I think the general rule of thumb is 10% of your net income to savings, and 15% to debt reduction, but if you have a lot of debt I'd throw money at it like crazy once you have an emergency fund established.
I probably have a much higher savings to debt reduction ratio that most, but that's because of different circumstances. My DH only works 10 months a year (he's in school the other 2 months), so we need to save each year for expenses, books and tuition for those 2 months. We also don't have a lot of debt; no car payment or CC debt, just my student loan. I am paying twice the minimum, but that's still not a lot.
As far as wants/needs, I give myself $120 a week for food/hba/household products, etc. I never use all of it, so I have a little left over for wants: treats, fast food once in awhile, a date with hubby. I buy the necessities first, and then what's left over is for fun. That way I still have some "blow money", but there is a set limit on it. Other things that crop up like gifts, clothing, etc are saved up for...I made a yearly budget and divided it by 12, and each month I put cash for it in the envelope.
Hope that helps!
__________________ Tara - proud to be a SAHW and SAHM!
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How does one balance needs, wants, and debt reducation?
I think you hit on the basic problem that must be overcome to be successful with your finances. People today are taught through the media and through advertisments that they need things that a few years ago did not exist. I think of when my father was born. He was born in a house with a dirt floor and one room. What did they need to survive? Sometime I think, although their life was hard, it may have been more enjoyable. My Grandmother would say that they were poor but did not know it because everyone else they knew were in the same boat. In the end, you really need very little.
__________________ Well Done Is Better Than Well Said............ Benjamin Franklin
The highest reward for a person's toil is not what they get for it, but what they become by it.......John Ruskin
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My thoughts on wants, needs and debt reduction are pretty simple:
Want - I want something. What do I want it for? Can I get it for fairly cheap? Can I wait for it to go on sale and get it then, and if so, will I still want it at that time?
Need - Basic necessities are needs and they come first. If it's an item that I need, but I also want, do I really want it or do I really need it? Utilities, food, clothing, shelter and items that help me get through the day/season are needs. A new computer, a fancy vacuum, even that David Archuleta CD coming out in mid-November is a nice want but I don't really need all these things.
Debt reduction - It's really easy to handle debt reduction. I look at what I need, how much I'll have left over after I get what I need, look at my debts and wonder if I can either wait until I pay off my debt to get it or if I really need to put the debt aside another month to get what I want. I focus most of my debt reduction on the months where I know I won't be as prone to buying things I want (Christmas mainly) and then lay off a bit on the debt reduction while still making the monthly payments.
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Mom to DS #1 08/13/98 Mom to DS #2 09/11/03
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First I think you need to define (HONESTLY) what is a "need" versus a "want".
Okay either I don't have many wants or I'm still fooling myself.
Here are the wants we have/purchase.
internet access (feels like a need)
Hubby online game fee
cable tv (we don't get channels without it and I know we have higher cable we tend to watch the learning channels which enrich our minds)
"rent to own" Cello and lessons for my son
We eat out a little more than we should (working on that)
We are a one car family, we rent videos with a gift card ( or borrow from the library), 80% of the children clothes are given to us most of the other is bought second hand (except shoes, underwear, and some socks)Hubby and I have limited wardrobes.
Does one need to cut out all wants while reducing debt? That seems like it might be counter productive like crash dieting.
Does one need to cut out all wants while reducing debt? That seems like it might be counter productive like crash dieting
Everyone is going to approach debt reduction in a different way, usually a way that works best for them and their situation. Some are able to get real intense and live on just the bare minimum because the thrill of seeing their debt diminish quickly is a great motivator. But for others, that may be just a bit too much, especially if there is a spouse involved who is not on board with the idea of sacrficing so much all at once.
I don't think there is just one right way to go about reducing your debt. Everyone has to find what works best for their situation
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Does one need to cut out all wants while reducing debt? That seems like it might be counter productive like crash dieting.
I would say no or you will go right back to bad habits... but you need to plan and account for wants.
I would do every thing I had to to give music to a child... we were lucky and our district provided a cello to our ds.. good thing because he switched to band .
We like to eat out so I put $15 aside from each paycheck so we can go 2x a month cheap or 1x nice... ( only 2 of us)
We are moving back to a cash society and we need to be prepared.
__________________
Meg
4 paid 2 to go
3/2033 mortage pay off date.4/2030 making progress
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It is a process you get better at as time goes by.
Make an effort with every decision to ask the burning question. Do I NEED this?
Can I make it myself, get it cheaper or for free or can I just borrow it?
I do it even in the grocery store and it keeps me away from prepackaged convience foods etc.
add to this: if i wait until tomorrow, will they need or want still be there? this is usually the case for me. if i wait 24 hours or a week the needs or want disappears. i usually forget about it.
i really really wanted a largish white gold diamond necklace that was in style/stylish. the want did NOT go away. so i bought it when i hit the 10,000 mark in savings.
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Mary Hunt method
mortgage free, debt free
10% gross to retirement
10% takehome to tithe and offerings
rebuilding contingency fund 3/1/2010 5413 (cap at 10,000)
freedom accounts/sinking funds that ebb and flow (cap at 5100) $766 3/1/2010
then live on the rest!
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Hmmm More info please. Why do you think we are moving to a cash society?
credit will not be as easy to get
banks will make wiser loans
CC are starting to lower credit limits for those without high FICO scores.
jobs are at risk
SS is at risk... it was planned to start at age 65 back when the average lifespan was 62 and now we live into our mid 80's
so what to do .. do not buy what you can not pay for. meaning a cash society. There will be credit but hopefully we will go back to not charging everything and having so much debt.
We do not need huge houses, cars that cost as much as a house $500 purses
Cash will be in some electronic form like debit cards but it is not CC and loans for short term items.
__________________
Meg
4 paid 2 to go
3/2033 mortage pay off date.4/2030 making progress
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credit will not be as easy to get
banks will make wiser loans
CC are starting to lower credit limits for those without high FICO scores.
jobs are at risk
SS is at risk... it was planned to start at age 65 back when the average lifespan was 62 and now we live into our mid 80's
so what to do .. do not buy what you can not pay for. meaning a cash society. There will be credit but hopefully we will go back to not charging everything and having so much debt.
We do not need huge houses, cars that cost as much as a house $500 purses
Cash will be in some electronic form like debit cards but it is not CC and loans for short term items.
Thanks for taking the time to share your thoughts. I truly appreciate it.
Your idea of a cash society was interesting to me , so while I was waiting I ran the idea by my Hubby. He is a credit administrator (he basically does all the research and making sure the loan officers have all the ducks are in a roll, all the i s dotted, all law met, and are making solid loans. He did not see a cash society in our future and did not think loans were becoming harder to get (I believe the bank he works for did not give easy loans to begin with)
He did believe that less pre approved credit card offers were being sent out by credit card companies.
When he was a loan officer he didn't offer credit cards to people he believed wouldn't be able to use them wisely or give loans out if not needed and afforded.
Maybe he was a head of his time.
He was interested in what you had to say so I'll pass it on.
It will be quite interesting to see how things change.
Okay either I don't have many wants or I'm still fooling myself.
Here are the wants we have/purchase.
internet access (feels like a need)
Hubby online game fee
cable tv (we don't get channels without it and I know we have higher cable we tend to watch the learning channels which enrich our minds)
"rent to own" Cello and lessons for my son
We eat out a little more than we should (working on that)
We are a one car family, we rent videos with a gift card ( or borrow from the library), 80% of the children clothes are given to us most of the other is bought second hand (except shoes, underwear, and some socks)Hubby and I have limited wardrobes.
Does one need to cut out all wants while reducing debt? That seems like it might be counter productive like crash dieting.
I think that without some wants, it really is like crash dieting. It just doesn't work in the end. You don't necessarily need to cut out all wants when reducing debts, but the smart cookies are the ones who will find ways to get those wants without breaking the bank.
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Wife to DH since 10/31/2002!
Mom to DS #1 08/13/98 Mom to DS #2 09/11/03
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I have been crash debt-reducing. And much like the dieting, it was successful at first and if felt great in a bizarre way. But then, we went out to eat 2 times in one week and blew $100 dollars ~ money that would have made about 15 meals at home. But it was okay, because all the bills were paid and we have earned that treat. I will go back to intense debt-reduction by choice for the next two months and then, due to dh's income in the winter, by need until May. I am okay with that though, and so is he. It will all be worth it when we have no debt a year from now, a new (to us) car and can think about a new (to us) vehicle for dh the next year. It's our five year plan and will pay off for the next 45+.
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Last edited by missyali; 11-08-2008 at 11:20 AM.
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balancing wants, needs, and debt reducation
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