How do you need vs how much you can actually afford

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When it comes to our monthly budget there are major items such as housing and car payments that can have a major impact on our personal finances. Of course, these are 2 things that we will be spending a lot of time in as well as using a lot, so we tend to want to spend more or splurge more on these things. The main factors that guide us are needs versus affordability.

First, we need to make sure we have both of these items. Affordability will play a role by guiding how much we are able to pay each month for these. But the bottom line is that having these things is essential. For housing we don’t want the spending to exceed more than 40% of our monthly budget. Ideally, you want it to be 30% and if its possible for home owners not having a mortgage payment. As far as car payments you will want your payments to be 15–20%.

Second, we have to determine our needs. If you need a car that seats 7, a car that doesn’t meet that requirement doesn’t meet your needs even if its affordable. The same applies to a home. If you have dogs or other pets you need a bigger yard, or a garage since not all houses come with them. Our needs have to come before affordability, and its important to understand the real needs versus our wants. A need is something that can be fulfilled, a car that runs is a need. A want would take the form of it has to be a…