Wants and Needs

You might have come across the Big Billion Day or the Big Discounts day where the retailer would have tried to lure you into buying or using their product or service. But eventually you realize that, “Hey! I actually didn’t need this thing”. Everyone has come across such instance, where the things we buy are not actually something that we need in our day to day life.

There is a thin line between your wants and your needs, and people are often confused between them. Is it the modern methods of advertising that drives your wants, well maybe.

So budgeting is one of the technique, which shall help you consciously decide what you want and what you need. But isn’t that too much of maths to do and finance to be understood to actually plan your budget. No it isn’t, a simple metrics shall help you into planning it in a more professional way. That is the 50:30:20 rule or to make it simple we will make it a 20:50:30 rule. Now changing the sequence actually helps you to set the chronology of budgeting.

The 20 here stands for 20% savings from your net income, 50 stands for 50% of your net income could be used for satisfying your needs and the residual 30% could be used towards your wants.

The idea of keeping 20 earlier, is because, it cultivates a habit of saving at an early stage and than planning your expenses. This way you will always have some savings set aside and if they are locked in, it would eventually lead to a compounding effect and accrual of wealth.

Now when you find a big discounts heading your way, you exactly know how much you want to spend, and if you still don’t, well you inly have 30% of your income at your service. So one should always remember, a penny saved is a penny earned, and must always thrive to save now as it may create a fortune for you later.