When it comes to frugality and saving it is good to know the difference between wants and needs. There is money to be saved in both areas but it may be better to start concentrating on the wants. Money is a limited resource and understanding wants and needs can help with how we prioritize that resource.
The general definition of wants and needs is the following. Needs are something that you must have for survival – if you don’t have them you will ultimately die. Pretty direct! Wants are something that is good to have but is not essential to your survival.
The definition may be pretty straightforward but when you apply it to daily life it soon becomes a bit of a grey area. Is your car a need? A Toyota sedan might be a need yet a BMW coupe a want… they both get you to work and back.
How do you tell the difference between wants and needs? A lot of the time it comes down to living within your means. Reducing the costs of needs so that you are living within your means. It is particularly helpful to use a budget such as the 50/20/30 Budget to ensure you are allocating a reasonable amount of money to each area of your life.
- Utilities – Electricity, Gas, Water.
- Sports / Club memberships
- Streaming services
- Dining out / takeaway