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Have you tried to reorganize your expenses and found that your needs and your wants blend together? It can get very frustrating, but hang on because you are going to see that identifying your needs from your wants is not that hard.

The infamous argument, of course, is that what is a need for one person is a want for someone else, and visa versa. So, what we have to determine is what is a need for you.

The best way is to write everything down on paper so that you can prioritize your expenses.

Begin your list with the expenses that you pay out each month to live. This list should include all the things you have to pay out such as your rent or mortgage payment, home and car insurance, utility expenses, car and/or loan payments, budgeted food and gasoline expenses, and medications. These are known as cost of living expenses.

You should also include in this list a designated amount that you need to put aside each month in some kind of a savings plan for your future. This may not seem like a necessary expense that you need to live on today, but it's a crucial one for later on. The age of retirement rolls in a lot faster than most of us expect, so don't be left in a state of poverty up ahead because you didn't prepare today.

And as well, open a savings account to use for a holiday or to buy a big household object with. Twenty dollars a week budgeted into a savings account will give you over a thousand dollars at the end of one year. What a perfect way to incorporate a holiday expense.

Now write a list of all the things that you would like to spend money on. These could include entertainment, eating out, shopping for clothes because you like clothes or shopping for extra house dcor. This list could be anything that you like to spend money on that is not part of what is needed to live.

Review both lists and you should have a better understanding now of what is needed to live and what is nice to have but what is not needed. Will this help with reorganizing costs?

Yes, because now you can ensure that your living expenses are paid first before your money is spent on wants. You can make automatic payment arrangements with your bank for as many of your living expenses as possible. To enable this plan to work efficiently, you will need to budget your income so that the appropriate amounts will be deducted from each pay. For example, if you get paid each week, you would divide your living expenses by four and have that amount go directly into your bank account each week. And what's left over would be your spending money for your wants list.

The key to success is to write everything down on paper so that you can see exactly which expenses are needed to live and which are not. This gives you the ability to set up a strategic financial plan. And you know that you are succeeding when after the first month you have paid all your bills without stress, and you realize that the money left over is for your wants list.

Learn more about this author, Ronnie Dauber.
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