There is a trap that we all fall in to from time to time. As humans, we generally lack perspective. See, we get wrapped up in our day-to-day lives, and kind of go on autopilot. We don’t really take a second to objectively look at our lives and realize how great we have it. We suck at counting our blessings.
We all also have another problem that is greatly related to our perspective issue. We often confuse the word “Want” with the word “Need”. Now, I know that you’ve laughed at a five-year old in your head, when they tell you they need this awesome new toy (Maybe a ), and that if they don’t get it this second, they are absolutely going to die. We laugh, and laugh, and then talk about how we need to get a new couch. Or how we need to get a new television. Or needing to go out to eat that night, because there is absolutely nothing to eat at the house. (Even though you fridge is full. Because mine is full every time I say that. Just putting that out there.)
And this whole idea of “Wants” and “Needs” goes into everything that we do in life. Sometimes, when we are having perspective, we can actually differentiate between the two. But sometimes, that line blurs. Other times, the line disappears completely. As I thought about this idea, of wants and needs, I realized that we all budget the wrong way. We budget by looking at what we make in a given month, and allocating our scarce resources. I call that “Wants” based budgeting. That’s why we need (which happens to be your new favorite 4-letter word) to take a different look at budgeting.
I know, I know, as soon as you read the word “Budgeting”, a lot of you tuned out. Some of you probably ran out of the room screaming, others broke the computer screen in disgust, and the rest tried to find their happy place on a beach somewhere far-far away from the word “budgeting”. But bear with me. By looking at a “Needs” based budgeting, I hope to give you a little bit of perspective. Maybe you’ll see like I did that your life is an absolute wonderland of blessings, dripping with decadence, and that you have it better right now, than 99.99% of the people that have ever lived on this earth.
First, let’s say that you are America’s typical family, two parents with two kids. So what does a household of 4 need? Well, I’ve narrowed it down to six basic needs: feel free to disagree, add or take away at your own desire when you make your own needs based budget. The list includes:
The first thing that should jump out at you when you see this list is that two of the six, in theory, are already free. You don’t have to pay Mr. Sandman whenever you take a nap, and there are no meter maids asking for a quarter every time you take a breath. So two of our six needs are taken care of already, without any action on our part.
Now let’s solve one of our most pressing problems first; how much does shelter cost? Well, that answer greatly depends on where you are at. So, your answer may vary, but in the Southern United States, the median rent for a home was approximately $800. According to deptofnumbers.com, the median rent for a house was $959. But these are average houses, and we aren’t trying to get the average price of our needs. We are cutting to the bare bottom, figuring out exactly what it is that we need. A quick search online for the cheapest places to rent apartments leads us to Wichita, Kansas. Briefly searching in Wichita, I found a three bedroom apartment renting for $495 a month.
Of course, it’s probably not the greatest place in the world to live, but its $495. And to be honest, you can buy an affordable house for much less. In most places in America, you can buy an acceptable house for $75,000. If you finance the entire price over 30 years, at 4.00%, then the mortgage is going to be about $358 a month. So, let’s split the difference between renting and buying, and say our shelter is going to be at bare minimum $400 a month.
The next needs that we are going to take are water and sanitation. In our Wichita apartment, the utilities are actually taken care of already! But assuming that they are not, the average water bill for a smaller house, depending on usage, is going to run you around $25 a month. Sewer, or sanitation, is going to cost a similar amount ($25).
The last need that we are going to confront is food. Now food can easily be a huge expense for most people, but if you pare it down to the necessities, you’ll realize that we spend much more on food than we realize. You could eat ramen for every meal, at about $ .20 a pack. But being more realistic, I’ll have some more leeway with this. It is entirely possible to feed a family of 4 for about $1.50 a meal, per a person. Considering that our family of 4 will eat 90 meals in the month, meals will run you about $540 for the month. Don’t believe me? Well here are some articles on how to keep you food costs down. (And I even gave you an extra few dollars a meal!)
Check out these articles for food ideas for a family of 4 under $10.
So, to review our “Needs” budget.
1.) Air – Free
2.) Water – $25
3.) Food – $540
4.) Shelter – $400
5.) Sanitation – $25
6.) Sleep – Free
Total – $990
$990 a month. That’s what you “Need”. Everything else in the budget is extra. Notice how transportation costs aren’t on there? How there isn’t a line for internet, electricity, or anything else? Simply put, they aren’t needs. They are pleasant extras that we often take for granted. And in a lot of places in the world, people make it on even less than what we covered above. Sometimes it’s by living with 15 people in an apartment. Maybe the family doesn’t eat 3 times a day. Even when we, in America and the rest of the developed world cut back to “Needs”, we would still be lucky, considering many people over the world have even less. So maybe when we go back to creating a traditional budget, we can trim down on some of our “Wants” categories, or at least recognize them for what they are. Wants not Needs.
So what do you think of the “Need” based budget? Can you get it even lower? Did it help you see where some waste was in your “Wants” Budget?