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Four Types of Spending and How Much Each Should Be

Congratulations on accepting that you need a spending plan to take control of your finances. It’s a defining moment in your journey toward financial freedom.

Now let’s dive into the 04 types of spending that you’ll need to include in your spending plan before you start looking at each individual item.

Understanding each type of spending will help you:

So let’s get into it. There are four main types of spending – needs, wants, savings and giving.


Needs are the bare minimum you need to spend to survive. This isn’t where you put your weekly hair cut or visits to the nail spa. 

Imagine you’ve lost your job and you need to use your emergency fund to tie you over until the next position came along. 

On your list of expenses should be only five items: 

  • Housing
  • Transportation
  • Utilities
  • Food
  • Work/school clothes

At a minimum you’d need somewhere to live, a way to get to and from work, keep the lights on, eat (pretty essential) and have clothes for work and/or school. 

Once you get a job, you would start to fund other categories of spending.


Simple Financial Health Check Steps


The Wants category of spending is the most fun. It includes the bulk of the items in your spending plan. However, you can break Wants down a bit further to identify which of your Wants are priorities.

Think back to our imaginary job loss scenario. Let’s say instead of finding a job that replaced your previous income fully, you got a temporary job, just to give your emergency fund a bit of a break.

That’s when you’d add in your priority spending – the Wants that are important to your mental, emotional, spiritual and physical wellbeing and quality of life. 

Examples of priorities could be giving (more on this later), a regular massage, fitness, vitamins, grooming, a small entertainment budget, etc. 

Though all of these are technically wants, identifying them gives you an easy plan for prioritising your wellbeing in a very stressful time, like getting a reduction in your income.

All the rest of your wants would be added into your spending plan once you had enough money to fund them.


The Savings category is a bit of a misnomer. Ditch the image of Scrooge McDuck and his pile of money sitting in a vault. That’s not what we’re talking about here.

The job of your Savings is to minimise risk, pay off debt and build wealth through investments – what we like to call your seed capital.

Here’s a quick list of what your Savings should go toward:

  • Emergency fund (03-06 months of Needs spending)
  • Paying off all short-term debt
  • Paying down your mortgage in 10 years or less
  • Investing in property and landlord expenses
  • Investing in the share markets (stocks, mutual funds, etc)

Remember, in order to reach mortgage and financial freedom, your Savings need to be doing more than sitting in a bank account accruing minimal interest. 

Couple using the Futurebound annual spending plan