2 How to manage your spending
You’ll have spotted that your spending is sometimes on essential things and sometimes on fun items that are clearly not essentials. But what about the things that are neither of these?
Activity 1 Can’t live without?
How would you classify the items of expenditure listed below? Work through the list and decide which of these categories best describes each item:
- an essential
- a non-essential
- a desirable (not an essential but something you can’t really do without).
Keep a record of the categories you’ve chosen. You might find it interesting to take a look back at these at the end of the course.
| Phone | |
| iPad/tablet | |
| Gym membership | |
| Meal out with friends each week | |
| Clubbing | |
| A holiday or break away | |
| Christmas presents for aunts and uncles | |
| Insurance for your phone | |
| Daily Costa Coffee (or other brand) |
Feedback
| Phone | Essential! |
| iPad/tablet | Non-essential |
| Gym membership | Non-essential or, perhaps, desirable |
| Meal out with friends each week | Non-essential |
| Clubbing | Non-essential |
| A holiday or break away | Desirable? |
| Christmas presents for aunts and uncles | Desirable? |
| Insurance for your phone | Essential!? – we’ll examine this later in this session |
| Daily Costa Coffee (or other brand) | Non-essential or, perhaps, desirable |
Some suggested answers are given in the feedback, but really classifying the items of spending is a personal matter.
Most people view a phone as an essential. It’s a means of wider e-communication and making transactions. Insuring your phone could be an essential cost too.
Most people would view having a break away, even if not a full holiday, as being close to an essential.
The other choices will vary from one person to another and will depend in part on what other members of your family and your friends do. The people closest to you and social pressures are very influential when it comes to financial behaviour.
What’s the reason for linking your spending to what is essential and what is important to you but not essential? It’s so that you develop clear thinking about where to make economies if your income is not keeping pace with your planned spending.
When you have to make cutbacks to your spending, start with the clear non-essentials. And then, if necessary, target those things that are not really essential – even though it’s difficult for you to do without them. Sometimes managing money means making tough choices.