Is it Something You Need? Or Something You Want?

Every purchase, whether big or small, affects your overall financial health. And making informed choices can help you build a stronger, more secure future. 

When it comes to managing your finances, understanding the difference between what you truly need and what you simply want is crucial. Explore the differences between needs vs. wants, how to prioritize your spending, and the strategies that can help you take control of your budget. 

Understanding the difference: needs vs. wants 

Making smart financial decisions starts with a simple question: Is this a need or a want? While both play a role in our lives, understanding the difference is key to maintaining a balanced budget and achieving financial stability. 

A need is generally something essential for your survival, well-being, or maintaining a basic standard of living.

Wants are things that enhance your lifestyle but aren’t necessary.

How to determine needs 

Figuring out whether something is a need or a want can sometimes be challenging, especially when emotions or social influences come into play. However, a need is generally something essential for your survival, well-being, or maintaining a basic standard of living. 

Needs will typically include: 

• Groceries 

• Shelter (and the bills that come with it, like your electricity bill and water bill) 

• Clothing 

• Healthcare 

• Transportation 

If you’re struggling to categorize something as a need vs. want, it can help to ask yourself a few questions: 

• Is this essential for my health, safety, or well-being?
• Will I face serious consequences if I don’t have this?
• Can I find a more affordable alternative without compromising my basic needs? 

You also need to learn how to differentiate needs vs. upgrades. While a car may be a necessity for commuting, a luxury car isn’t. And while food is a need, frequent takeout or dining at expensive restaurants is a want. 

Identifying the minimum requirement for a need helps control unnecessary spending. 

How to determine wants 

Unlike needs, wants are things that enhance your lifestyle but aren’t necessary. Determining wants from needs is key to managing your budget wisely and avoiding unnecessary spending. 

Wants can include: 

• Designer clothing
• Luxury cars
• The newest phones and gadgets
• Dining at restaurants
• Buying coffee every day at a coffee shop
• Premium groceries
• Vacations and extra travelling
• Subscription boxes or plans 

If you can’t decipher if something is a want, you’ll need to ask yourself some questions: 

• Does this improve my life (or do I need it to survive)?
• Would my well-being be at risk if I didn’t have it?
• Is there a more affordable alternative that meets my basic needs? 

Download the Needs vs. Wants Assessment

How to budget for your needs and wants 

Creating a budget that balances both needs and wants is essential for financial stability and long-term success. While needs should always take priority, allowing room for wants can help you enjoy life without compromising your financial goals. 

Using the 50/30/30 budget 

Creating a budget can help you categorize your purchases. Specifically, the 50/30/20 budget can benefit you the most, as things get separated into needs, wants, and savings. By following this structure, you can cover essential expenses, enjoy fun spending, and still work toward your financial goals. 

50% – What you need: Half of your spending should go to essentials, which are things you must pay for to afford basic living needs. If your necessary expenses exceed 50% of your income, you may need to cut costs (downsizing housing, reducing utility bills, etc.) or adjust other spending categories. 

30% – What you want: This portion of your budget is for discretionary spending. This allows you to enjoy life while still maintaining financial balance. If you need to save more or pay off debt faster, you can reduce spending in this category. 

20% – Savings and debt repayment: The last 20% of your income should be dedicated to strengthening your financial future. Things in this category can include emergency funds, retirement savings, debt repayments, and any other savings. 

How to adjust your spending 

Sticking to a budget isn’t always easy, especially when unexpected expenses arise or your income changes. Adjusting your spending in times of need helps ensure that your financial priorities stay on track while still allowing flexibility for life’s ups and downs. 

Here’s how you can make smart adjustments to your budget when needed. 

Track your expenses 

Before making changes, review your spending habits to identify areas where you may be overspending. Use budgeting apps, bank statements, or a simple spreadsheet to categorize your expenses and pinpoint unnecessary costs. 

Prioritize your needs vs. wants 

Cutting back on non-essential spending is the easiest way to adjust your spending. Think about the extra things you do each month that aren’t vital to your survival. Eating at restaurants, going to the movies, and getting your daily coffee shop coffee might need to be cut out. 

Reduce fixed costs if possible 

Some essential expenses, like rent or car payments, may feel unchangeable, but there are ways to lower them. You may be able to refinance your home, negotiate insurance premiums, switch to a different cell phone plan, or even take public transportation. 

Set spending limits 

A practical way to control spending is by setting limits for things like groceries, entertainment, and shopping. Consider using cash or a debit card for these purchases to avoid overspending with credit. Looking for coupons in fliers or online can help reduce the prices of your purchases significantly. 

Finding the balance between needs vs. wants 

Recognizing the differences between essential expenses and discretionary spending can help you make more intentional spending decisions. The trick is to spend wisely, adjust when necessary, and prioritize financial well-being.