Step 3Separate your wants from your needs
After the previous exercise, which provides you with a detailed insight into your expense structure, you will no doubt be surprised by the role certain items play in your overall expenses. Before they decide to quit smoking, people are usually shocked to discover how much they spend each month on that small pleasure, but even things such as going out for drinks or buying gifts can be more significant than you think, due to something we call “impulse purchases”.
Now, how to differentiate between your wants and your needs? Before buying anything that you’re unsure which category it falls into, you could, for example, try to live without it for a few days or even weeks. Or to ask yourself: how were you able to live without it until now.
You can have everything you desire, but ask yourself first if you can afford it.