Budgeting is a financial tool that families can use to get their financial houses in order. A budget is essentially a blueprint for spending. It accounts for the money you have coming in, the money you have going out, and the bills you are paying along the way. For some families, setting up a budget for the first time reveals quite a few surprises.
For example, that moment parents finally come to terms with the amount of money they spend on entertainment might also be the moment they realize it is time to cut the entertainment budget. They are spending way too much; more they can really afford.
Yes, it can be hard to cut the entertainment budget. After all, it’s hard to imagine what to do with yourself if you stop going to movies and eating at restaurants. But reducing what is spent on entertainment is entirely possible. There are lots of low-cost activities that can fit the bill and save a ton of money at the same time.
It’s All about Priorities
Everything relating to budgeting has to do with priorities in some way. A priority is something that is important. It is important enough that it takes precedence over other things. Food is a great example. It is a priority because you would starve without it.
Budgeting 101 dictates that there are essentials families cannot live without. These essentials become the top priorities in a family’s budget. They include things like food, clothing, housing, and utilities. They are nonnegotiable. They absolutely must be paid for come hell or high water.
Everything else falls lower on the priority scale. So if a family is looking at the entertainment budget and suspecting that they are spending too much, the question is whether or not entertainment is a priority. Is going to the theme park this summer more important than holding onto that expensive data plan? If so, cut the data plan. If not, keep the data plan and skip the theme park.
Wants and Needs Are Different
All of this leads to the inevitable reality of having to distinguish between wants and needs. For some people, budgeting is more difficult than it needs to be because they do not know the difference. If this is you, be confident in one thing: wants and needs are two separate things.
You need food. Without it you would die. You want a smartphone, but you don’t need one. Plenty of people in this day and age survive without one. And of course, billions of people have survived over the course of world history without owning phones.
That moment you realize you have to cut the entertainment budget is also that moment to consider what your genuine needs are. Anything that is not a genuine need is a want by default. However, don’t get the wrong impression. Wants are not a bad thing. Nor is working to acquire them.
Covering Your Needs First
Budgeting is all about making sure you have enough money to pay for your needs first. Anything left over can be put toward those wants, based on priorities. Covering your needs first ensures that those basic necessities are always available. That is a good starting point.
In all of this, remember the most fundamental law of budgeting: the number in the spend column cannot exceed the number in the income column on a regular basis. Spending more than you earn is a recipe for financial disaster. Get in too deep and you will discover that cutting the entertainment budget is the least of your worries.