Needs On A Budget - Part 5 Of How To Build A Winning Budget

We need to make sure we cover our basic needs.

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Needs > Wants

I’m ready to get to the part where I tell you that all the money you have left over is yours to do with as you please.

But first, we need to make sure we cover our basic needs.

I think it’s safe to say most people would immediately define basic needs as food, shelter, and clothing. And they wouldn’t be wrong. However, I lump a few other things into this category that I consider “needs” in our modern society.

With that in mind, let’s take a look at what should be covered in the “needs” portion of our budget.

Basic Basic Needs

First, we need to eat, or the rest of this is not going to mean much for very long. With that in mind, budgeting for food goes right at the top of this list. I won’t lie, this is a tough line item for my family. We tend to “eat up” quite a bit of money here, but you can adjust this based on your families needs. We’ll talk more about how to trim the food budget in a later post.

Second, we also need a roof over our heads with the lights on. That means mortgage/rent, and all the bills associated with your living situation need to be next on your list of importance.

Next, of course, we need to be able to get from point A to B if we’re going to keep the money coming in. That means planning for transportation in some form. Maybe it’s gas and basic repairs, or maybe it’s setting aside money for public transportation.

Also, I’d include communication here. In our highly connected world, if you do not have access to at least a phone line, you’re probably going to struggle. More recently, an internet connection has become nearly as essential, as more businesses move to virtually driven models. So, let’s get these on the list as well.

Lastly, you will need some sort of healthcare eventually, and you’ll probably need to pay something for it. For my family, this month was a big dental month. Fortunately, we were able to use our budget to prepare for it. We set this up as a sinking fund (more on that term in a later section).

To sum up “Basic Basic Needs”:

Food
Shelter
Bills
Transportation
Communication
Healthcare Costs

Less Basic, But Still Needs

It would be noticeably difficult to live without the items in the previous section.

In truth, you could probably exist without the items listed next for a good while. But, when the inevitable day comes that you need them, you’ll wish you’d planned a little better.

Now it’s time to talk insurance.

DON’T LEAVE! I promise to keep it simple and brief.

It’s like this. If you’re going to go through all the trouble to get your finances in order and get yourself on a budget, you need to protect your work. That’s it. That’s my whole case for setting these things in place.

These are the types of insurance my family has, nothing more or less:

Health
Term Life
Disability
Homeowners
Auto
ID Theft
Dental Savings Plan (Not technically insurance, but similar principle)

Those are in no particular order, because to really cover our bases, we need them all.

See? I kept that short. But, please don’t take short to mean unimportant. You NEED to set these things in place to protect yourself and your family.

Do This Now

First, list out these categories. Feel free to use sub categories if it helps you. We break everything out as much as we can. For instance, “Bills” become “Utilities” and “Natural Gas” because our service providers are different. But, that’s a matter of preference.

Next, go through your records and find out what each of these categories is costing you each month. If you’re spending $2,000 on food and your take home pay is $2,500, it’s time for an adjustment. Some categories can’t be quickly adjusted, like your mortgage/rent, but again, you may learn you have too much house. We did, and we downsized!

Lastly, if you are missing any of the insurance I listed above, it may be time to look into getting a policy in place. Sooner rather than later!

Whew! Now that bills and insurance are done, head over to Part 6 for the fun stuff!

Budget At A Glance (So Far)

Section 1: Gross Income

Section 2: Paycheck Deductions

Section 3: Giving

Section 4: Debts

Section 5: Investments

Section 6: Basic Needs, Including…

Food
Shelter
Bills
Transportation
Communication
Healthcare Costs
Health Insurance
Term Life Insurance
Disability Insurance
Homeowners/Renters Insurance
Auto Insurance
ID Theft Insurance
Dental Plan

If you’re going to go through all the trouble to get your finances in order and get yourself on a budget, you need to protect your work. That’s it. That’s my whole case for setting insurance in place.

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Alex

Hello, my name is Alex! I'm a public school teacher who has achieved some big financial goals just by getting control of my money using some simple strategies like using a monthly budget. Now I'd like to share what I've learned with you. Welcome to "Bank on a Budget!"