If money is tight, it’s likely that you’ve sat down and worked out your incomings and expenses, in order to see where your money is going every month. However, it’s important to consider two different types of expenses: those that you have to spend every month, and those that are optional (such as entertainment). Keep reading to find out what each of these entails.
Needs Only Budget
A needs only budget should be a list of things that you absolutely have to pay each month. This should include things like the rent, your energy bills, basic food items, and any transportation you need to get to and from work. The reason why knowing your needs only budget is good, is because if you fall on really tough times, you will have an idea of how much money you need to earn to get you through a truly basic month. You can also work out whether a short term loan will help you, until you get paid.
An Optional Budget
An optional budget, also called a lifestyle budget, should include everything in your needs only budget, in addition to the luxuries that you pay for each month. This includes entertainment options, luxury food and takeaways, and nights out. The reason why experts often recommend you create an optional budget is so that you don’t fail when it comes to saving.
It’s a good idea to write out both a needs only, and an optional budget, just so you know where you stand with your finances. A short term loan could help cover you for anything extra that surprises you during the month.