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One of the things I am asked regularly is this: “What’s the first thing I need to do to get going with a budget?” I almost always answer with this: “Get your priorities straight.” Before you can even think about budgeting, controlling your spending and/or digging yourself out of a debt-hole, you need to figure out what’s important to you and plan accordingly.

Priorities: wants and needs

One of the first things you have to figure out is the difference between wants and needs. This is actually harder than it sounds for some people. For instance, if you have available, convenient and reliable public transportation, you do not, in fact, need to drive your car to work everyday (and this will allow you to save money on gas). And, while you may need to wear clothes, it is not necessary to buy expensive designer duds. The list goes on. Basically, though, needs can be broken down into these items:

1. Shelter (rent/mortgage, utility bills not including TV and Internet)
2. Food (not eating out)
3. Clothing
4. Transportation (if you have to commute to work)
5. Preparation for the future (emergency fund, retirement account)

Everything else falls into the category of “wants.”

The first rule of priorities is that needs come before wants. When creating your budget, you need to make sure that there is enough money set aside to cover your obligations and your needs. After that, you should make sure there is money to make payments on debts and other obligations. (Note: You should never pay unsecured debt — like credit cards — before you make a mortgage payment. Always make sure your secured debt is taken care of first.) Then, if there is anything left over, it can be used for wants.

Priorities are important. Part of the reason we are in the mess we’re in is due to the fact that we lost sight of our priorities at some point.

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J. Money’s at a wedding, and will return tomorrow. He wishes you a very sexy day!