You are probably searching for something like “Needs vs Wants” or “difference between needs and wants”. If this sounds about right then you came to the right place! Money Tree Network is here to help you learn how to budget, make money, and save money.
Today we are going to review the basic definition of a need, the difference between a need and a want, and even make a needs and wants list.
Basic Need Definition – Budgeting
Before I can give you a definition of a need, you really have to understand that there is no uniform list of needs. Everyone sees something else as a need. Basically, a need is just something that you cannot live without. I usually think of this as housing, utilities, transportation, basic clothing, and basic food.
I like to think of these things as needs because they are the essentials in life. I can live without other things in life.
What is a Want?
Again, there is no one-size fits all definition of a want. Some people may think that steak is a need and some may think that it is a want. To me, it is a want because there are alternative foods that you can easily eat such as chicken, vegetables, and fruits.
To break it down, a want is something that you don’t absolutely need. Unless you are working from home, WiFi may be seen as a want. Eating out at restaurants and going out with friends are usually also wants. We will go into more detail a little later on.
Needs vs Wants: How to Budget For Both
The 50 30 20 budgeting method is the method that really focuses on breaking down your needs and wants. In this budgeting strategy, you are supposed to put 50% of your budget towards your needs, 30% of your budget towards your wants, and 20% towards savings.
First write needs at the top of the page and then skip a few lines and write wants. List out all of your expenses in order of importance. Housing, utilities, food, and transportation should be at the top of the page, and then you may get into your wants. Again list these out in order of importance. Once you reach 30% of your total budget, you just have to cut it off.
By writing out your expenses in order of importance, it will be easy to figure out what can be cut if you are not able to afford it. Please try to stay away from putting things on credit cards because that debt will rack up quickly.
Your other option is to just find alternative things to do! Instead of going out to dinner with your friends, maybe pack a picnic and go down to the park. Sometimes this option is more fun anyway because you can talk more, you could bring yard games like cornhole, washers, or horseshoes.
Needs and Wants List
- Basic Food
- Going out to eat
- Nice Car
- Lottery tickets
- Gym membership
While this is a list of the needs and wants that I have in my life, you may have more in both categories! Tell me about some of your needs and wants in the comments section below.
NerdWallet has a great post about needs vs wants that you can check out. It features a 50/30/20 calculator that I think is awesome for anyone looking to budget properly.
Why Are Needs More Important Than Wants?
Are you asking something like “why are needs more important than wants?”? The basic answer is that needs are things that you cannot live without. Needs will keep you alive, while wants will keep you happy.
How Can I Decrease My Spending?
Being happy with what you have
Being happy with what you have is one of the best ways to decrease your spending. Just because your neighbor has a Porsche, doesn’t mean that you need one. If you live modestly now, you will be able to live high later.
This doesn’t mean that you can’t have fun!
Go for a hike, have a picnic, have a movie marathon at home! These are all things that you can do for free. You can also make a small budget for other things. I have heard of couples giving themselves $40 per month for fun stuff. You could have a little more or a little less as long as it fits within your budget.
You should always think about what you are buying before you buy it. When you are buying groceries, think about if you really need the name brand food and consider whether you need to buy steak or if chicken will do. While these are just examples, I am just trying to say to consider your purchase before you make it.
You should also keep track of everything that you are spending money on. This is especially true for the first few months of budgeting because it’ll help you break your budget down by category.
Differentiate Your Needs and Wants
Never let your needs and wants crossover. Check out the above list to understand the difference between your wants and needs and stick to it. If wi-fi starts out as a want, keep it there. Eating out should never be seen as a need.
To Sum It Up…
To sum it up, understanding the difference between needs and wants is extremely important in budgeting. You have to realize that needs are the essential in life, while wants are the extra things that might just make you happy for a day or 2.
By thinking before you buy anything, being happy with what you have, and not letting your needs and wants crossover, you will be able to spend less and live more later. What kinds of free things do you like to do?