‘I need this’ vs. ‘I want this’.
Knowing the difference between these 2 statements can lead to either abject misery or inviolate bliss.
Am I being dramatic?
Perhaps. But if so, not by much.
The first step my clients go through is creating their monthly cash flow statement (e.g. budget).
I do this so they understand where their money goes in order for them to assess whether it’s where they really want it to go.
The ability for any of us, including me, to know what one needs vs. what one wants, affords one the ability to pare back during times one may have an unexpected expense or income changes.
This is super critical: When we have an unexpected expense, and don’t feel we can make trade offs to meet the expense, we either go into debt or we pull the money from our savings account.
Not being able to know where to make trade offs to accommodate these events means you don’t have flexibility in your budget.
Means you don’t have Lifestyle Elasticity: Knowing when and where to pare back when you need to.
Living below your means and being able to know when and where to make tradeoffs: Super important to your ability to reach your financial goals, to stay on track, and, perhaps most importantly, to feel empowered with respect to your money.