The Expense Equation: Balancing Needs, Wants, and Financial Freedom

The expense column is basically an outflow column by which we distribute our income into different categories based on our own discretion.

Depending on whether we've developed financial structure or not, some of us have a neat and orderly expense column while others have a disorderly one.

However, the difference isn't necessarily or always due to a lack of financial structure. Because sometimes, life brings the unexpected and we have to change course to adapt to the new situation.

That said, I personally prefer and always work towards having a neat and orderly expense column. Maybe it has more to do with personal temperament than moving along with the ebbs and flows of life.

In my view, a chaotic expense column can feel like losing control of the steering wheel of our financial lives. Conversely, a well-structured one instills a sense of calm, empowerment, and a clear direction.

As if we're in some way navigating a financial map, plotting out a route that will lead us towards a key destination: financial freedom.

Image Source

Exploring The Expense Column

In theory, distributing our income into different categories such as 'needs', 'wants' and 'financial freedom', with the goal of achieving balance among them will mean an almost equal percentage for each category. Perhaps, 35% needs, 30% wants and 35% financial freedom.

This can be a good and default way to operate from, but the reality is rarely so neat. Life throws curveballs, priorities shift, and sometimes "wants" creep into the "needs" category.

I'd say aiming for almost equal percentages might seem ideal, but applying a one-size-fits-all formula can be a recipe for frustration.

In practice, individual circumstances, earning potential, and long-term goals all play a part in determining the precise mix that works for us.

For example, at this stage of the journey, I don't mind cutting out the 'wants' category and focusing only on the other two. Because 'needs' and 'financial freedom' are much more important and more substantial to me.

The thing about the 'wants' category, especially in the modern era, is that it is like a bottomless pit. In that, social media thrives on creating FOMO(fear of missing out) and constantly feeds us with new desires.

Granted, it's tempting to justify occasional splurges. But they can quickly snowball into a habit that undermines our needs and delays our journey towards financial freedom.

Image Source

A Key Destination

Financial freedom is both a journey and a destination. However, when we come to the destination aspect. Financial freedom marks a shift in how we handle our options. The constant pressure to "keep up" fades into the background, replaced by the liberating possibility of saying "no."

Of course, this is merely the psychological aspect of financial freedom. Which I think is often overlooked in the modern era. Thanks to our insatiable wants, financial freedom is mostly portrayed as amassing vast amounts of wealth. The idea we got sold is that insatiable wants equates vast amounts of wealth.

But in its most basic form, financial freedom is simply reaching a point where our income comfortably covers our needs, which allows us to pursue our passions and interests without financial anxiety.

So, this key destination is first reached through a psychological shift before it can actually materialize into reality.


Thanks for reading!! Share your thoughts below on the comments.

Posted Using InLeo Alpha