Needs vs. Wants

By Kaitlyn Szabo November 1, 2018

 

Define Need vs. Want

A need is an expense that is essential for you and your family to live and work. Typically, this includes the recurring expenditures that eat up most of our budgets: housing, utilities, transportation, food, and healthcare.

A want is nice but non-essential for survival. These are items you can live without (even if you don’t want to give them up!), such as travel, entertainment, subscriptions services or memberships, and luxury items.

The purpose of defining a need vs. want is not to eliminate all desires from your budget or your life. Separating your purchases into these categories allows you to be more self-aware of your spending and better align your money habits with your values. Doing so allows you your money most efficiently by prioritizing needs first, then spending on your most preferred wants after.

 

Breaking it Down

Needs and wants are dependent on the individual – a car might be a need in your family, but public transit or biking might be an option for others. To determine what is (and is not) critical to your everyday survival, do the following:

  • List everything you buy and categorize it.
  • Divide the categories into needs and wants.
  • Prioritize needs first, then list out wants by order of preference.
  • Trim spending in both the need and want categories to maximize savings.

 

Strategies to Build into Budget

So you know your needs and your wants… now you need to stop overspending on the latter. Easier said than done. Here are some strategies for spending smarter and more aligned with your financial goals.

  • Identify a “want” you are overspending on and try to figure out the underlying “need” you are trying to meet. For example, going out for drinks is a want that meets a critical need to socialize and be with friends. Next, brainstorm ways to address this underlying need less expensively.
  • Unsure if something is a need or want? Switch to a lower cost alternative or do without it for a month and reassess. Can you live without it? If yes, it’s a want. If no, it may be a need.
  • Stick a picture of a goal on your coffeemaker or computer to stay focused.

 

Money Management E-Newsletter: October 2018