Looking at your needs vs wants is a helpful way of figuring out a better way to handle your spending and budget.
Understanding the difference between needs and wants will help you manage your budget and prioritize your spending.
Needs are essential to living comfortably (for example shelter and food) but wants are often expenses you can do without (like eating take-out every day).
In theory, distinguishing between needs vs. wants should be easy, but it can be difficult in practice. Understanding the difference can help you be better prepared to assemble a budget you can follow. It may also help you from putting unnecessary purchases on your credit card, which can potentially lead to poor credit.
Here, we provide you with tips on how to tell the difference between needs and wants. Once you develop the habit of differentiating the two, financial planning becomes a cakewalk.
The difference between needs vs wants
Examples of needs
Needs include basic living expenses. If someone goes without a need, there is a clear adverse outcome, like a lack of food or shelter. Expenses that are needed include:
- Food: groceries, pantry essentials, and other necessities to prepare food
- Shelter: rent or mortgage payments
- Utilities: electricity, water, and sewage
- Services: high-speed internet (if you work or study from home) and cell phone service
- Clothing: basic clothing, sturdy shoes, and possibly work clothes
Examples of wants
Wants are basically everything that’s not a need—things that you’d like to own or choose to buy. Some examples of ‘want’ that you may come across while budgeting is:
- Food: restaurants, takeout, and bars
- Shelter: high-quality furniture, televisions, and home decor
- Transportation: an electric scooter
- Services: high-speed internet if you do not work or study from home
- Clothing: additional and expensive clothing or shoes
Ask yourself, do you need something?
If you do not, then we’d suggest you wait to make the purchase until after the necessary bills and payments are made.