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Needs vs Wants: Understanding Your Budget


There are some things in life that we definitely need. For instance, you need a roof over your head to keep you safe and warm, as well as food to eat each day, and electricity in your home for heating.

However, there are other things that we want. We might want tickets to a concert we’ve been dying to see, or the opportunity to go out for a movie and dinner.

Sometimes, it’s easy for wants and needs to get confused. For instance, although you need food every day, you don’t need a gourmet meal to stay alive. That’s why it’s so easy for people to get lost when they’re trying to figure out what they should spend on certain parts of their budget.

Managing your lifestyle means knowing how to distinguish wants from needs. Here are some tips to help with that process.

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Understanding Your Needs

Let’s start by looking at needs. Needs are those things in life you simply can’t go without. For instance, as we mentioned above, you need a house or somewhere to live, heating, electricity, food, and all of those crucial things.

You may also need transportation to get yourself to and from work so you can make an income, and you’ll need to spend cash on things like clothes and hygiene products from time to time too.

However, when you’re establishing your needs, you’ll also need to consider when they start to go from the “needs” column, into wants.

You might need a car to get you to work, but it’s important to look at your budget and determine how much you can afford to reasonably spend on a car before you go looking into loans and other deals.

When you’re making your budget, your needs should be the things that you account for first – before anything else. If you haven’t got enough cash left to look at your wants after you’ve dealt with your needs, then you may need to look into things like using a private loan to consolidate multiple balances into one debt, you can use this strategy to cut monthly bills by reducing your interest on things like student loans.

Spending on Wants

Once you know how to define a need, it becomes much easier to determine what wants are. The important thing to remember when you’re choosing your wants is that you shouldn’t ignore this part of your life entirely. It’s easy to assume that when you’re trying to be cautious with money, you should cut down on your wants and focus entirely on your needs.

While that might be a necessary practice at particularly difficult times in your life, most of the time, you will need to save a little money aside to buy the things that you want from time to time too. This is how you keep yourself from falling off the wagon with your budget and ensure that your spending goals are realistic.

As important as it might be to be sensible with your money, you will need to have some fun from time to time, too.