Budgeting Basics: Wants vs. Needs

Distinguishing between a need and a want is pretty simple until you find yourself in the middle of the frozen food aisle at the Marketplace with Ben and Jerry calling your name. “I have to eat, right?” we might think to ourselves. Or when you find a designer blouse in the Black Friday sales and think to yourself, “Well, I need clothes on my back so I need this blouse!”


Distinguishing between needs and wants

One of most important keys to managing the household’s finances is the ability to properly distinguish between our needs (the things that we need in our lives in order to survive) and our wants (the things that are not absolutely necessary in order to survive). Some great examples of needs are food, shelter and clothing. While many of us are aware of this, it can be difficult to admit that we have turned some of our wants into needs without even noticing. To that list of needs, we would add saving for the future. This is not an option, but something that is indispensable.

Like the situation above, it is essential that we have the proper vitamins, minerals and nutrients that make our bodies run – does this include the chocolate ice cream that was calling your name? Of course not! This is a want or something we’d like to have. This is, of course, a very simple example but it seems that as soon as our basic needs are met, our personal definition of wants and needs begin to blur.


Tips on creating a budget

When creating your budget, it is important to realise that creating wealth begins with taking care of your needs and cutting back on your wants. Setting aside consumption today in order to have greater consumption in the future is hard to do. Wants are important. They can make life more enjoyable. But you have to stick to the wants you can afford, and we must be able to prioritise them. For example, there is nothing wrong with having a cell phone plan with unlimited data, but it shouldn’t be to the detriment of your budget. If you’re finding that things are a bit tight every month, then maybe reducing your data allowance and using WiFi more frequently would help.

You also can reduce spending within your needs. A great example would be to monitor your weekly grocery bill and ask yourself which items are essential for good nutrition and which are expensive luxuries with more affordable substitutes. Also, by taking advantage of the weekly five per cent discount, you can save enough over a year for two weeks of free groceries.

Review your budget and identify your needs and your wants. By reducing our wants, there likely will be room for additional savings, but remember that wants and needs may mean different things to different people. The key here is to be honest with yourself and your budget; to live within your means and reward yourself along the way.

DISCLAIMER: The content in this article is for informational purposes only and is not intended to be a substitute for professional medical advice, diagnosis or treatment.