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We all have our ways of destressing after a long day. One of my weirdest and most beloved post-work, take-a-load-off strategies has always been cruising the aisles of gourmet grocery stores just to look at packaging. Give me an aisle of fancily bottled extra virgin olive oil, and I'll need at least an hour. Nothing is more calming to me than fancy fonts on fancy jars of fancy imported foods.

I don't even need to buy anything. Often I just stroll around, try a sample of pickled figs, and continue my stroll home. Sometimes though, I'll splurge on a $3 glass bottle of spring water from some promised fountain-of-youth in Italy. This, to me, is the quintessential quandary of wants vs. needs: I need to drink water, but I don't need it to come from a hydro-spa in Lurisia.

What's a Want? What's a Need?

There were a lot of comments in my last article about spontaneous spending as to how to determine wants and needs when budgeting according to the Balanced Money Formula in Warren and Tyagi's All Your Worth. Whether you use their formula or not, figuring out the essentials of your budget is important. For those of you just tuning in, the balanced money formula says that 50% of your income should go toward needs, 30% to wants, and 20% into savings. I think this comment exemplifies some of the confusion:



The discussion went on to include a lot of grey areas:

Car payments. If you bought a new car, how much of the purchase was the need of a car as opposed to the want of buying new?

Rent. Is paying higher rent to live closer to work a want or a need?

What about student loans? We need to pay those off but we didn't need to go to a fancy private school.

I took to the Balanced Money Formula because it gave me a way to not have to worry about the particulars each month. I was just so tired of not knowing where my money had gone at the end of the month, or trying to keep track of how much I was spending in a given week. If you know where your money is going, you don't have to worry so much about it. First though, I had to iron out some of these grey areas.



Two Carts of Groceries

I wasn't about to through the grocery store with two carts of groceries, one with dried beans and broccoli and one filled with ice cream and Perrier, so where to draw the line? Warren and Tyagi recommend using the USDA monthly allotment for food, which averages to around $250 a month depending on age and gender. Anything over and above that comes out of wants. I've heard of a few different systems for allocating this money. One is to use cash, about $65 a week, and put that in your wallet with your weekly wants cash. All food just comes out of that stack o' bills.

Another idea is to have a debit card that debits directly from an allocated account. Personally, I use my phone to keep track of it all. The important part seems to be to find a system that doesn't seem overly complicated to you and to stick to it. When the cash dries up, I'm brown bagging it the rest of the week to work.

Rent, Car, Loans…Netflix, Gym, Phone?

My needs category was way over 50% when I first looked at it. The stuff I had to pay each month was more nearing 70%. Outside of my monthly need of calories, what else went into my needs categories? For most, rent, car payments, student loans. Okay. What else are we contractually obligated to? Netflix memberships, gym dues, data plan? Uh oh, the grey areas seem to be growing.

Well, not exactly. What were my hardcore commitments? A lot of my monthly auto-payments started going away as I clicked “unsubscribe.” Since my monthly payments were above 50% of my income, I started eliminating the things that I could get for free, whether it be using the library for movies or just taking my jogs in the great outdoors. If I wasn't willing to cut them completely, they transferred to wants. Fine. My digital subscription to The New York Times is a want. Ugh. You start to cut where you can barely feel it.

I should add that both in the book and here at Get Rich Slowly you can find great strategies for reducing your student loans (Whether or not your liberal arts degree was a need is no longer the question — paying for it now is.), finding more appropriate health insurance, and renegotiating your rent. All these things take work and research, but their reduction in monthly cost won't hurt your current lifestyle and can help you reduce costs.

I still wasn't under 50%. I had to look where it hurt a little more. The book recommends selling or downgrading your car, getting a roommate, trimming your health insurance bill, returning any rentals like furniture, and re-shopping childcare. For me, I have no car, no kids, I barely have health insurance and my apartment is a major part of my business. I just couldn't. Well, I could, but it would require the next step, which would be what the book calls “radical surgery” such as selling your home for something cheaper, moving apartments, or changing jobs.

Also listed under “radical surgery” is taking in additional income. For me, it didn't feel very radical or surgical at all so that's what I did, far less painful than moving apartments at the end of my lease. I added five hours a week by taking on an extra gig, which takes away a few hours of my nighttime routine of drinking fancy bottled water and listening to Pandora One, but the extra income takes my needs under 50%.

But it Hurtsssss! Why Do This to Yourself?!

I do it because I sleep better. The Balanced Money Formula has a lot of variables, and I had to finesse what went where, but after I figured it all out, it was a deep breath. 50% is a sustainable number that allows me to live well and have fun. I had to give stuff up and take on some additional income. I had to figure out what went where and set up the system how I kept track of everything. I had to wait a while for some contracts to expire, like downgrading my phone, but ultimately, for me, it really works.

No one has all the answers for you and often, there isn't an easy solution. It isn't about being perfect, it's about being empowered and doing the math to trust that your finances in balance, fudging it where you need, so you can sleep easy.

So how about it? What seems impossible to categorize? How can you bring more balance to your budget?