How to Honestly Frankly Evaluate your Financial Situation Necessities vs Luxuries

When economic times are tough and money doesn’t stretch as much as you’d like or think it should, it’s time to sit down and evaluate your personal financial health.

The reason you need to do this is because you don’t want your financial situation to end in one that leaves your finances in ruin. If you sit down and find your expenses are routinely exceeding your income, this is going to eventually lead to big time debt.

Self-evaluating one’s financial situation can be tough because expenses are often hard for people to cut. After all, who likes to give up the things they enjoy or have become accustomed to in their daily habits?

After sitting down and exploring where money is going, most people at first feel there is nothing more they can do to scale back. Rarely is this ever the case for the first evaluation. Chances are if one goes back and takes a good hard second look and is honest about their expenditures, they’ll find areas of spending they can cut back on.

There are many areas of spending people can cut back if honestly looked at seriously. Many utility expenses, such as telephone, water electricity, gas and heat can be scaled back on if used sparingly and not wasteful.

Personal expenses are also typically easy to cut back on when necessary. Trips to the mall for new clothes can be transformed to trips to thrift stores, consignment shops or garage sales. If these are absolute, there are always clearance racks. Often you can find some pretty good stuff at bargain prices.

Society spends a lot of money every day on things that are luxuries. Think about it. Today people carry cell phones, subscribe to all kinds of pay television packages, eat out at restaurants or buy convenience foods, spend good amounts of money on entertainment and even things such as the daily Starbucks stop for a cup of java.

Are all of these things absolute necessities? Arguably a cell phone can be considered a necessity, but what about all the bells and whistles that often come with them? These all cost money. Services and capabilities such as photo-taking, text-messaging, television and Internet connection are luxuries for a cell phone.

For instance, most people pay for Internet service at their homes, and if this is affordable that’s all well and good, but if struggling financially, why pay twice for the same kind of service to use on two different electronic devices?

Many television packages are expensive and if you look at options, there is typically a more affordable package, even if you have to give up some of the channels you enjoy. Or cut out pay television all together and buy the basic monthly package and read books from the library or watch pod-casting online.

These are only a couple of examples of expenses many people in society today consider a necessity, but if you sit down and honestly evaluate your financial situation, it’s hard pressed to argue that these are not necessities. By cutting them you can get back on financial track. This is often difficult to do because it’s hard to give up the things we enjoy.

Society has become accustomed to a different standard of living, much different than our parents and grandparents had. Back then people raised either in the depression or in the subsequent decades understood the value of a dollar and how to save money.

The best way to evaluate your financial situation honestly is to evaluate yourself. Start by creating a budget and list all expenses and sources of income, be truthful as you go through expenses and divide up necessities vs. luxuries. Afterwards go back and look at the necessities and see where they can be scaled back.

If we reflect and learn how to truly evaluate the difference between needs and wants, it’s much easier to do an honest financial evaluation.