"Needs" are costs that are essential for living, such as food, accommodation, transport, etc. "Wants" describe those costs that are discretionary, such as money for coffee each morning or buying takeaway food.
When you record your costs, be as thorough as you can be but don’t be too shocked or too surprised if the wants outweigh the needs – this is pretty normal. The list should point out expenses that can be curtailed resulting in funds that can be used to offset debt.
Earn a Higher Income
Finding alternative (higher paying) employment, taking a second job, or working overtime - these are examples of good options as long as the extra money is used solely for the purpose of debt reduction. It defeats the purpose if you increase your expenditure in proportion to your higher income.
The key takeaway is to use the income you earn and prioritise paying off your debt without downgrading your lifestyle. Read more on debt management and learn how you can regain control of your finances.
Don’t Take Financial Risks
Speculative “get rich quick” schemes are usually fraught with high risk. If you have debt and don’t have any surplus funds (i.e. spare money after needs and wants are met) you are probably not in a secure enough financial position to risk losing your money because such losses would undoubtedly impact on your ability to meet future needs and wants. More often than not, people who make risky financial decisions lose more than they gain with such behaviour often becoming as addictive as gambling.
When it comes to spending your hard earned money on “investments” or speculative schemes, it’s probably better to take a more conservative approach depending on your appetite for risk.
To prevent individuals from taking undesirable financial risks, try to remember how hard you worked to get that money in the first place or how long that money took to save before you commit anything and consider how long it would take to recover from the financial mess that would be left in the wake of an investment gone bad. Fortunately for most people, the thought of losing everything that you’ve worked so hard to get is sufficient to take the shine off any get rich quick scheme.
Budget, Save, and Set Goals