Budget Basics: Needs Vs Wants

After you’ve decided to venture into the world of budgeting, you be asking yourself, how do I determine one? What needs to be in my budget anyways? Are there some sort of categories I need to be following? Although these are all great questions, and have great and beneficial answers, the one question we’ll be answering is what needs to be in your budget, through the example of needs vs wants.

What’s a Need? What’s a Want?

In life, there are needs and wants. A need could easily be classified as something simply as, what do you need in order to survive? For you to be a functioning member of society, and a capable adult, what are some of the basics that you need? For most of us, our needs can be categorized for easily:

• Shelter ( You need a place to sleep.)
• Food ( You need food to work, sleep and I don’t know, live?)
• Transportation ( You need to be able to get to and from work and school)
• Clothing/ Hygiene ( You need protection from the elements and it’s illegal to walk around naked. 🙂 )
• Utilities ( You need to have running water,electricity to cook and see at night and gas to perhaps heat your living space or cook as well.)
• Prescriptions ( You need to be able to maintain your health and take medications as prescribed to you for ailments and health issues.)

You need other things as well, such as love and happiness, a sense of belonging, etc, but for now we’ll just focus on these things in our budget. Now, what’s a want?

• Entertainment
• Smartphones
• Internet
• Excessive shopping for fun ( extra clothes, accessories, shoes)
• Household items that are non-essential ( throw pillows, candles, etc)
• Alcohol
• Eating out
• Take out coffee
• Electronics
• Makeup
• Travel
• Anything else NOT ESSENTIAL to your survival.

Now, we are not saying that wants do not belong in your budget. Far from it. As a matter of fact, I always make sure there is plenty of room in my budget for wants, most specifically, travel and entertainment. But wants should definitely not take up more than 25% of your budget, nor should they stop you from making financial goals for yourself and making progress on them.

Needs should also not stop you from making financial headway on your goals either. You need shelter, but you don’t need to live in the fanciest place with no roommates either. You need food, but you do not need to eat out everyday. And you need to be able to get to and from work, but you most certainly do not need a fancy SUV with rims.

What are some of your needs? What are some of your wants?