Needs Vs. Wants

online shopping

posted June 24, 2021 in Blogs

Is anyone else having post Amazon Prime Day guilt? Are you thinking to yourself, did I really need that, or did I just want it? We’ve all been there. Separating wants from needs can be a pain point for many. Especially when making small and large purchases is just a few clicks away.

One of the most important parts of setting a monthly budget is separating needs from wants. Before you even assign dollar amounts to categories, it’s important to know which parts of your monthly expenses are absolute needs, and which items are nice to haves, but not necessities. Many find this challenging, and many even give up on budgeting when they can’t find their way through this step.

Fortunately, it doesn’t have to be this way. We’ve outlined how to tell the difference between wants and needs, as well as how to separate these two categories on a monthly budget plan.

Defining needs and wants

  • need is something that is necessary to live and function.
  • want is something that improves your quality of life.

By using this criteria, separating expenses into the two categories becomes simpler. Needs include food, clothing, shelter and medical care, while wants include just about everything else. However, as you’ll find when creating a budget, these terms are more fluid than they appear to be at first glance. While working through your lists, you may find that some items can fit into both categories, making the process slightly more confusing.

A good trick for dividing wants from needs is to let time pass before pulling the trigger on purchasing the item, either theoretically or practically. The desire to obtain a need only grows stronger as time passes, while the desire to fulfill a want will weaken with passing time.

Listing your needs and wants

Now that we’ve defined each of these budget categories, you can begin listing your own needs and wants.

Start with your needs, including the basics, like food, rent or mortgage, as well as other fixed expenditures that are necessary for you to live and function. Those things may include transportation costs, health insurance coverage, any clothing or tools you need for work, and utilities such as gas, water and electricity...we hate to break it to you but streaming services such as Netflix and Hulu aren’t needs.

It’s important to note that needs will vary from one person or family to another, and even for people at different stages of life. For example, a family with two working parents who live in a community where there is no reliable public transportation may require two vehicles. On the other hand, a family living in a city with several dependable transportation systems may list a second car as a want. Similarly, a four-bedroom home may be a need for a family while they’re raising several young children, but turn into a want later when the kids go off to college.

If you get stuck on a particular item and don’t know where to place it, hold it up to the following questions:

  • Do I really need this item to live and function?
  • Is it possible to fill this need in a less expensive way?
  • How would my life be different if this item were not a part of it?

When you’ve completed your list of needs, you can list all remaining expenses in your wants category.

Reviewing and tweaking your lists 

After completing this exercise, review your list of needs to see if anything can be removed. Will you still need these items a few years from now, or even a few months from now? Can any of your needs be swapped for a more affordable option? For example, you may need clothing, but do you need eight pairs of designer jeans?

Next, do the same for your list of wants. This is a good time to complete a reality check and see if any items on your list because of pressure to ‘Keep up with the Joneses’? Pare down your list until you’re only left with wants that truly add value to your life.

Now that you know how to tell the difference between needs and wants, creating a monthly budget is simple. Assign dollar amounts to your fixed and non-fixed needs, set aside money for savings and use the rest to pay for your wants.

In the future, you’ll likely also have an easier time keeping your impulse buys under control. Before purchasing an item, ask yourself if it’s a need or a want. If the item is a want, consider its importance and other wants you’ve recently bought before going ahead with the purchase.

Here are some additional tips to help determine if something will add value to your life:

  • Use your online shopping cart to your advantage. After clicking ‘add to cart’, force yourself to wait a certain amount of days before purchasing. If you are still thinking about an item 5 days after finding it, it’s likely a true want and not an impulse buy.
  • Ask yourself if you’re purchasing just because it’s on sale. While browsing a store or online, if you notice something on sale but it’s outside of your normal buying habits, you are likely not saving any money at all.

Separating wants and needs can be one of the most challenging parts of creating a monthly budget, but it is possible with a little upfront thinking! What tips and tricks do you have for separating things into the two categories?