Budgeting is a balancing act. The secret to sustaining yourself from day to day while also reaching financial goals is building a budget that balances your needs with your wants. Pinpointing the difference between the two is a subjective proposition.

The “needs” that are really “wants”

In budgeting worksheets, some people object to separate categories for items in the “wants” category. Home internet, for example, is classified as a want and not as a need. But if you do not work from a home office (in which case your home internet is a business expense), there’s a good chance that home internet is a want (because let’s face it, you’re probably using it primarily to watch Netflix).

And the same is true for your cable television — your Netflix subscription and your iPhone as well. It also goes for your hair dye … These are all wants and not needs. You totally can do without these things, if you were forced to. They’re not necessary to live, as painful as it might be to lose them.

Cross-category needs and wants

Of course, wants and needs, sometimes, don’t fit into neat, distinctive categories. It’s too simplistic, for instance, to say that your grocery store spending is a need. Your entire grocery bill is a combination of wants and needs. Bread, milk, eggs, and whole fruits and vegetables can be classified as a need.

But, on the other hand, chips and cookies are most certainly not a need. Fruit juice is a want, especially if it is of that upscale variety. Milk is a need, but organic milk is a want. And so is the whole grain, organic honey-infused bread.

A lesson that can apply to your life

The 50/30/20 budget says that 50 percent of your after-tax income should be spent on “needs,” 30 percent should go to “wants,” and 20 percent should go to savings and debt reduction. That means there’s nothing wrong with buying fancy bread and milk or subscribing to Netflix. The 50-30-20 budgeting rule of thumb allows you to spend 30 percent of your take-home pay on things you want. The key is to separate your wants from your needs so that you’re more self-aware of how you’re spending money.

Takeaway

Distinguishing “wants” from “needs” will truly help you realize how much power and control you have over your own budget. If you’re choosing to spend money on wants, you easily can choose those items and re-direct your money elsewhere. After all, budgeting, at its very core, is not always about crunching numbers. Budgeting is the art of aligning your spending with your values.

Raising children without a partner can be challenging – emotionally, physically, and financially. Challenged by the work involved in earning a living and caring for children, single parents can sometimes feel that they may never break the cycle of living paycheck to paycheck.

But, even if you have a limited income, you may find that simply managing your money better can alleviate some financial problems and allow you to save for the future. Consider the following steps toward becoming a financially savvy single parent: 

Analyze Your Expenses

The first step is to take stock of your situation. What are your fixed costs? How much do you pay for housing, utilities, transportation, and childcare? If these expenses alone consume most of your income, leaving you with little money for groceries or discretionary spending, consider whether some of these costs could be reduced or eliminated entirely.

If your mortgage, property taxes, and utility bills are more than you can reasonably handle, selling the house and moving to a smaller place may be an appropriate option. It may be difficult for you and your children to leave the family home, but the prospect of having more money to spend on other things may make it worth it. Similarly, it may make sense to trade in that late-model sport utility vehicle for a more fuel-efficient or used vehicle.

If you need childcare while you are at work, there may be ways to reduce your costs. Daycare centers are often more expensive than programs offered by local religious institutions or YMCAs. If your children only require after-school care, a stay-at-home parent may be willing to help out in exchange for your babysitting services at other times. You may also want to speak to your employer about working a flexible schedule or doing some of your work at home. If you do pay for childcare, be sure to claim all available tax deductions and credits.

Control Spending, Start Saving

Next, assess areas where you can cut back on other forms of spending. By keeping a diary of all expenditures over the course of a month, you can identify some fat that could be trimmed from your budget. Simply replacing takeout with fresh, but easy to prepare, meals can save a bundle.

With your spending under control, you can start planning for the future. After establishing a fund for emergencies, think about your retirement and education goals. If your workplace offers a 401(k) plan, try to contribute at least enough to take advantage of your employer match. You may also want to consider putting money into an Individual Retirement Account. If paying for your children’s college education – or your own – is a priority, look into several tax-advantaged accounts that can help you save efficiently.

Secure Insurance Protection

While finances may continue to be tight, it is important not to overlook the need for adequate health, life, and disability insurance. How would your children cope if you were no longer able to support them? To start, all families need health insurance. If you do not receive benefits through your employer, look into a high-deductible catastrophic policy that covers the costs of serious illness or hospitalization. Depending on your income, your children may be eligible for public health-insurance programs.

Consider also the protection offered by life and disability income insurance. Life insurance can offer funds that can be used to maintain your family’s standard of living in the event of your death, and disability income insurance can replace a portion of your income if you sustain a sickness or injury that prevents you from working.

Despite your efforts to cut costs and adhere to a budget, you may still find yourself burdened with credit card debt. If possible, move the debt from higher-interest to lower-interest credit cards. Then, develop a strategy to pay down debt gradually and within your budget. In the meantime, avoid the temptation to take on new debt.

Sticking to a budget can sometimes feel like an exercise in deprivation, but it doesn’t have to be if you set aside money for a few treats, like a weekly family pizza night. Even if you can only contribute small amounts, create a “fun fund” to be used for a vacation or a trip to the amusement park. Providing for a family on your own is a challenge, but it is one that can be managed with careful planning.

Where does all your money go? The truth is usually not that mysterious. You can discover it with a little discipline on your part—along with the help of a budget. Many people spend their money in small increments without realizing how it all adds up. By helping you track your income and expenses, a budget can help you gain control of your personal finances.

Make It a Family Affair

Creating and maintaining a budget is often more successful if it is a family affair. All adult family members should be involved in the process. Since children affect and are affected by the budget, they should be included as well. When they see that the family’s income is not unlimited it can help them understand why everything they want is not always theirs for the asking.

Each family requires a personalized budget tailored to its own particular needs. Here are some of the basic steps to follow:

1. Track Income and Spending

To start, tally all your sources of income and spending for a few weeks or months. The easy way to do this is to get a receipt for all expenditures over $1.00. You can also refer to credit card statements, receipts, and check stubs.

2. Categorize Expenses

Set up different categories for your expenditures. The two basic types of expenses are: 1) fixed—those over which you have no control, such as mortgage or rent, insurance, and utilities; and 2) discretionary—those over which you do have control, such as clothes, movies, sports events, and dining out.

3. Set Priorities

When you begin to see how much money is coming in and how much is going out, it is time to set priorities. Is your objective to buy a house or a new car? Or, to save for your child’s college education or your retirement? Perhaps your top priority is to get out of debt.

4. Prepare the Budget

Now that you have a handle on your current income and expenses and have established some priorities, you are ready to prepare a budget. Remember to keep it simple. The less complicated, the easier it will be to maintain. For instance, to estimate expenses such as tax bills or insurance premiums, simply calculate the annual expense and divide by 12. The budget process should give you a better sense of where you need to cut expenses. It may take several passes before you whittle them down to bring them in line with your income and your financial objectives.

5. Stick to It

Get in the habit of reviewing your budget at least monthly. A weekly review is even better. A budget must be consistently maintained in order to work.

6. Conduct an Annual Review

Also, review your budget at the end of each year. By totaling what you spent and comparing it to what you had budgeted, you will see areas to work on for the coming year.

Additional Reminders

Once you have prepared a budget, there are still some important things to remember. First, don’t forget to set aside emergency savings in case of an unforeseen problem, such as a job loss, or an unexpected major expense. The general rule of thumb is that an emergency savings fund should cover three to six months’ worth of living expenses. To work best, savings should be set aside on a regular weekly or monthly basis. And second, keep a close watch on your credit card spending. Don’t let your credit cards run away with you. Due to the ease of using credit cards, many people end up buying things they don’t really need and that may end up costing them even more in finance charges if they don’t pay the bill on time.

Many families are always wondering where their money went. By making a budget part of your family’s financial routine, you could be well on your way to solving the all too familiar “Case of the Missing Money.”