The third and last element in the debt relief formula is WANTS. So far we have taken your disposable monthly income (DMI), your gross income minus your taxes, and shown how 50% is for your Bare Necessities and 20% is for your Savings. That leaves a balance of 30% which is for your Wants. If your DMI is $2,200 then you have $660 each month for Wants. That’s the calculation but what exactly is Wants. This is the portion of your income that goes to anything you desire. And that means anything. Well, that sounds great. In the example you have $660 cash to splurge. You want to have fun and enjoy life. This is healthy and reduces stress. Right? Absolutely, yes. This creates a balanced approach to your whole life—not just the financial part but as a total person who has more facets than just the one—a dollar sign. There is your intellect, your emotions, your body and your spirit craving and deserving some attention. If you are living within your Bare Necessities already, then you can use Wants money for whatever makes you happy. This is fantastic.
The challenge and the reality for most of us though is that we are exceeding our Bare Necessities allotment each month. We created a hole in the foundation. Yet despite that shaky set up, we still strongly feel that our Wants must be fulfilled. This is the natural inclination we have to round out our personalities. Wants fulfillment helps us progress towards happiness–in theory. Financially, however, when out of balance it can be suicidal. We go about our lives borrowing and spending (using credit cards, loans, etc.) for recreation, restaurants, fashion, gadgets and whatever turns us on, not only exceeding our 30% but amassing debt to try and satisfy our needs. Eventually we recognize the big pinch in our wallets. Ouch. The satisfaction and attempts to gain fulfillment through our Wants sours quickly into immense debt load and debt problems. This leads of course to distress, dissatisfaction, debt depression and even pressure upsetting or destroying good relationships or health.
The technique to deal with this is to regain balance and control of your spending. Go back to basics: Bare Necessities 50%, Savings 20% and Wants 30%. This is the simple and effective starting point to financial healing. Living by this formula will eventually free you of your debt making habits and ultimately will allow you to pay off your past debt and create an pro duc tive and totally satisfying future.
*Post content is primarily derived from the book All Your Worth by Elizabeth Warren & Amelia Tyagi which is highly recommended reading.
Iowa Bankruptcy Attorney Robert Liptak
Fairfield, Southeast Iowa