Feeling stir crazy with your money? Blame it on COVID.

My wife Lisa and I like watching a home improvement show called “Leave it to Bryan.” It features Bryan Baeumler, a veteran home contractor. In the show, Bryan visits couples in their homes, and the couples pitch Bryan on three dream home renovations. The catch is Bryan picks one reno that is done. (The program airs on Mondays at 10 PM on the HGTV channel.)

The show’s magic happens when the homeowners are set on one thing, but Bryan picks something else. Want to see raw human emotion? Watch what happens when granite countertops are already picked out for a new kitchen, but Bryan chooses to renovate the leaky upstairs bathroom instead.

I thought getting between a mama bear and her cubs was dangerous. Try separating a couple from their subway tile backsplash. Vicious!

I love the show because it’s a fascinating look at human needs and wants. Sure you want a brand new kitchen. But you need to fix the rotten floor in the upstairs bathroom before the tub comes crashing into the kitchen.

If you ask me, home contractors and financial advisors have the same basic job. They both help people deal with their needs and wants.

Needs vs. Wants: Why Does it Matter?

Whether you’re doing a home renovation, or planning for your retirement, differentiating between needs and wants is important. Why? Because spending without the financial resources to back it up can put real stress on your financial situation.

Here’s the kicker: Determining your needs and wants is hard, even with professional help. And it’s getting even harder with the COVID 19 pandemic.

Look. Everyone needs to indulge themselves every now and again. Right? But the pandemic has shut almost everything down. People want to spend money, but there’s few places to spend it. It’s no wonder why many of us are feeling stir crazy!

It’s okay to feel a little stir crazy. After all, these are crazy times.

But it’s important to stay on track, especially when it comes to your hard earned money. The good news is you can find balance between your needs and wants. Keep reading to find out how.

A Need or Not a Need. That is the Question.

If you read a lot of finance articles and blogs like I do, you’ll probably come across something like this:

Needs are items that you need to survive. These are things like food, shelter and clothing. Wants are items that are nice to have. They are not things that you need to survive. 

Random finance blog

You can throw that advice onto the pile that includes “Stop buying coffee in the morning. You’ll save $30,000 over your lifetime.” Both ideas sound smart, but they’re completely useless in the real world.

The reality is there’s plenty of grey area between needs and wants. We are all different. So putting needs and wants into neat little boxes is almost impossible. That’s why budgeting fails most of the time. Many people try to do a budget, get frustrated filling in a worksheet, then give up.

Here’s an example: Netflix. Is it a need or a want? If you’re a parent with young kids stuck at home because of COVID, Netflix is a need. (These kids are driving me nuts! Time for Paw Patrol on Netflix.) For others trying to save money, Netflix is a want. (I want my own subscription, but I’ll keep using my sister’s account until she finds out I stole her password.)

Groceries are another example. Food is definitely a need. But if you look at your grocery bill, it’s filled with both needs and wants. Milk, eggs, vegetables? Those are needs. Chips, cookies, pop? Those are probably wants. Organic avocados? (I give up… Hey, what’s on Netflix?)

So what do you do? If needs are in the eye of the beholder, how do you guard against blowing your money on niceties vs. necessities?

A rule of thumb that’s actually useful

Listen, if you dress your dog in designer clothes, I say go for it. I’m not the guy who tells people how to spend their money. Just don’t spend all your money on Louis Vuitton for your pug.

A useful little rule of thumb is the 50/30/20 rule. The idea was invented by Elizabeth Warren. (That name may sound familiar. It’s because Ms. Warren is a Senator from Massachusetts who ran for president this year. Yes, that Elizabeth Warren. Before she got into politics, Ms. Warren was a Harvard Law professor and author of several personal finance books.)

The 50/30/20 rule says that 50% of your after-tax income should be spent on “needs.” 30% should go to “wants,” and 20% should go to savings and debt repayments. I like the rule because it gives people permission to spend 30% of their take home pay on things they want. Like I said, you need to live a little.

The key to success is to be aware of your total spending, and to stay close to the 50/30/20 boundaries. That will keep your financial situation in balance. And if you find that your current spending is not in balance, here are some tips from FP Canada to get you back on track:

Understand your relationship with money: Emotions often impact our decision making. So if you’ve noticed a change in your spending habits, take a look inward. For example, a stressful time at work may trigger an unsustainable spending spree. Finding the root cause of your spending will help keep your finances in balance.

Start small: Set small attainable goals. That will boost your confidence and give you momentum toward achieving your bigger goals. Many things can be automated today. For example, you can set up a small automatic deposit into a TFSA.

Talk to a professional: Like a good home contractor, an independent financial advisor can help you create a plan to reach your goals. They can also help you when the unexpected happens, adjusting your plan as needed.

A final thought

There’s another reason why I like the show Leave it to Bryan. It almost always ends on a happy note.

The homeowners might not get what they want. But they’re usually ecstatic with the dream renovation that they need. The show usually ends with the homeowners giving Bryan a big hug for the awesome job he’s done. Of course, that’s before COVID 19 and the whole social distancing thing.

Take care everyone, and stay safe!