Budgeting is a balancing
act, and a good budget helps you create a balance between your wants and needs.
However, when it comes to determining your monthly budget, you need to
understand whether a category is considered a want or a need. Outside of budgeting,
this goes for your purchases too. Wants and needs will vary from person to
person; determining whether a purchase is or not can be tricky. Here are a few
ways to help you distinguish between wants and needs.
Wants and Needs: How to Balance Both in a Budget
What is a Need?
Needs are line items that are essential for you to survive and for you to do your job. For example, clothes might not necessarily be a need for your job. However, if your job requires business casual clothing and you have none, getting new clothes would be a need. However, that doesn't mean you need to shop at a top of the line store if your budget doesn't allow it. Common sense is always at play!
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Some examples of expenses that are considered needs include:
● Mortgage or rent payment
● Utilities
● Healthcare expenses
● Medication
● Food
● Work uniform requirements
● Gas/commuting funds
What is a Want?
An expense that is a want is purely luxury. These are things that you don’t need to survive but are nice to have and can improve your quality of life. These are things that you choose to spend your money on but are not a necessity. When discussing our pantry challenge I often explain how LaCroix water has slowly crept onto my grocery list and while water is a need, fancy overpriced water like LaCroix is a want.
Some examples of these
expenses include:
● Eating out
● Travel
● Subscriptions and memberships
● Streaming services
● Entertainment
● New clothes
How Do You Know if It’s a Need or a Want?
For some items, the line
between whether it’s a want or a luxury can sometimes be a bit fuzzy. It can be
hard to figure out what category it falls into because not everything fits into
one of these broader categories. For example, the internet is an essential
expense if you depend on it to earn your income. However, while this might feel
essential, internet is just a want if you only use it for entertainment.
Another example would be groceries. While we need to eat to survive, just
because it goes on the grocery bill doesn’t make it a need. Soda, for example,
while nice to drink, is not essential. This purchase is a want. However, if you
have the room in your budget for these wants, it’s okay to group them in with
other purchases that are otherwise considered needs.
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3 Ways to Distinguish if Something is a Want or Need
What is a want for some
people is a necessity for survival for others. As we mentioned in the internet
example, if your job depends on it, then the internet is a need just as much as
could be a want. To help, here are some questions to ask yourself to figure out
if it’s a want or a need.
● If I cut this from my expenses right now, how
would this change my life?
● Is there a way to reduce or cut back on this
expense?
● Is this truly something I need for survival or
for my job?
When it comes to your finances, determining things that are wants and things you need can help you work toward your financial goals and help you decide what should be cut from your budget! Hopefully, this guide has helped make it easier to figure out what things are a want and need in your budget.
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