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The difference between wants and needs

The difference between wants and needs
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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.

Wants or Needs BMW

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.

Here is a list of expenses that generally fall under the category of needs:
  • Housing
  • Transportation
  • Utilities – Electricity, Gas, Water.
  • Food
  • Insurance
  • Taxes
Below are some expenses that would likely be classified as wants:
  • Entertainment
  • Travel
  • Sports / Club memberships
  • Streaming services
  • Dining out / takeaway
  • subscriptions
When you are going through your expenses before creating a budget it can be helpful to categorize the items into needs and wants. Once categorized you can put them in order starting with needs and finishing with wants.
You may find that a lot of your wants fall into the category of subscriptions, here is a post to help you go through and reduce the impact subscriptions have on your budget.

Comments (1)

  • When you find things that you want to buy or do that you currently can #39;t afford, it becomes all too easy to focus on those things to the point of overlooking all the many possessions that you do have.

    Reply

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