Wants and Needs Examples: Managing Your Budget

Managing personal finances requires a clear understanding of the difference between wants and needs. By looking at the wants and needs examples outlined below, and distinguishing between these two categories, you can create a budget that positively impacts your financial well-being and overall quality of life.

In this article

Defining Needs in Budgeting
Defining Wants in Budgeting
The Fine Line: Differentiating Between Wants and Needs
Practical Needs and Wants Examples in Everyday Life
Budgeting Strategies: Prioritizing Needs Over Wants
The Impact of Recognizing Wants and Needs on Financial Health
Frequently Asked Questions

Defining Needs in Budgeting

A need is something essential for your survival. Without it, you would face serious challenges to your physical health or safety. Think about the basic necessities: food, water, shelter, and clothing. These are the fundamental requirements that everyone must have to maintain a healthy life.

When I was fresh out of college, living in my first apartment, money was tight, and I had to make every penny count. One day, my old cell phone broke, and I was faced with a decision. The iPhone had just been released a couple of years earlier. Should I buy the latest iPhone or opt for a basic model that did the job? After some reflection, I realized that while having the newest phone would be nice, it wasn’t a necessity for survival. I chose the basic model, saving myself from unnecessary expenses and potential debt.

Needs also extend to medical care, housing costs, and basic utilities. These are non-negotiable expenses that ensure a satisfactory life. For instance, if you live in an area with harsh winters, heating is not a luxury item but a basic requirement.

Defining Wants in Budgeting

On the other hand, wants are things that enhance our daily lives but aren’t essential for basic survival. They are the luxury items that make you smile, and bring comfort, and convenience. This category includes designer clothing, expensive gadgets, entertainment subscriptions, and dining out.

While these items can significantly improve our quality of life, they aren’t fundamental requirements. For example, while designer clothing might make you feel stylish and confident, it’s not essential for protection against the elements, which is the primary purpose of clothing.

The Fine Line: Differentiating Between Wants and Needs

It’s not always black and white when distinguishing between wants and needs. Aspects of life that might be a luxury for one person could be a necessity for another. For instance, a cell phone might be a luxury for someone who uses it solely for entertainment, but for another, it’s a fundamental tool for work.

Transportation costs are another area where the line blurs. If you live in a city with efficient public transportation like New York City or Boston, owning a car might be a want. However, if you’re living on the outskirts of Dallas or San Diego without access to public transport, a car becomes a necessity.

Mental health is also a vital consideration. While basic survival doesn’t require a monthly subscription to a streaming service, if watching movies or TV series helps you cope with mental health issues, it becomes more than just a luxury.

Making informed decisions about wants and needs requires introspection and an honest assessment of your circumstances. It’s important to strike a balance that ensures both physical and mental well-being.

Understanding this balance can help you in budgeting by helping you prioritize your expenses. For instance, necessities for basic survival, such as medical care and housing costs, should be addressed before spending on luxury items or entertainment.

However, again considering your mental health, if you live in an area with high crime rates, this can lead to poor morale can increase your anxiety levels. Ensuring a safe environment, even if it means a slightly higher housing cost, can be a worthy investment in your overall well-being.

Practical Needs and Wants Examples in Everyday Life

Let’s take a look at some practical wants and needs examples to clarify the difference:

Transportation: While having a vehicle might be necessary if you’re living far from public transportation, the type of car can fall into the ‘wants’ category. A reliable, fuel-efficient car meets the basic requirements. In contrast, a luxury sports car, while nice to have, is more of a want.
Clothing: Basic clothing to protect against the elements is a need. However, opting for designer clothing or expensive brands when more affordable options are available is a want.
Cell Phone: In today’s digital age, having a cell phone is almost a necessity for most. Yet, while a basic model that allows for calls and texts might be good enough, the latest smartphone with high-end features becomes a luxury item.
Kid’s Toys: High-quality, educational toys for your children are an essential need. However, be careful not to cross the line by overwhelming them with toys that are both unnecessary and costly.

Consider this list of top 20 expenses that could be either a need or a want, depending on your situation and budget:

Expense	Needs Example	Wants Example
Dining Out	Home-cooked meals: $50/month	Regular visits to restaurants like Olive Garden: $200/month
Coffee Shops	Brewed coffee at home: $10/month	Daily Starbucks latte: $90/month
Milestone Birthdays	Putting together a budget 40th birthday celebration: $500	Hiring a party planner and inviting 100 guests: $3,000
Cable TV	Netflix subscription: $15/month	Full cable package with HBO, ESPN: $80/month
Gym Memberships	Jogging, home workouts: $0/month	Membership at LA Fitness: $40/month
Clothing	Essential clothing from Walmart: $50/month	Shopping sprees at Macy’s: $200/month
Luxury Items	Affordable brands: $50/month	High-end brands like Gucci: $500/month
Subscriptions	Basic Spotify plan: $10/month	Multiple subscriptions (Spotify, Apple Music): $25/month
Alcohol & Bars	Limit purchases: $30/month	Regular nights out: $150/month
Tobacco or Vaping	Reduce frequency: $30/month	Regular purchases: $100/month
Takeout	Cooking at home: $150/month	Frequent takeout from Chipotle: $300/month
Travel	Local trips: $200/year	International vacations: $2,000/year
Mobile Phone Plan	Basic plan with T-Mobile: $40/month	Unlimited plan with Verizon: $80/month
Electronics & Gadgets	Use current devices: $0/month	New iPhone upgrade: $1,000/year
Hobbies	Free or budget-friendly activities: $20/month	Expensive hobby supplies: $100/month
Personal Care	DIY treatments: $20/month	Salon visits: $100/month
Home Decor	Essential improvements: $50/month	Decorative items from IKEA: $200/month
Books & Magazines	Borrow or swap: $10/month	New purchases from Barnes & Noble: $50/month
Transportation	Public transport: $50/month	Personal car fuel and maintenance: $200/month
Groceries	Buy in bulk, store brands: $300/month	Organic, branded items from Whole Foods: $500/month

Table: The top 20 needs and wants examples that can be considered a need or a want depending on your situation.

Budgeting Strategies: Prioritizing Needs Over Wants

Creating a budget is your first step in managing your wants and needs. Budgeting doesn’t mean depriving yourself of all luxuries. It’s about making informed decisions that ensure your fundamental requirements are met first. Here are some strategies:

Track Your Spending: Regularly review your bank statements and credit card bills. This can provide insights into your spending patterns and help identify unnecessary expenses. A budgeting app is a great way to track expenses.
Set Clear Goals: Whether you’re paying off your debts, saving for retirement, a vacation, or building an emergency fund, having clear financial goals can help you prioritize your spending.
Limit Impulse Purchases: Before buying luxury items or spending on entertainment, take a moment to reflect. Is this purchase going to enhance your quality of life in the long run, or is it a fleeting desire?

The Impact of Recognizing Wants and Needs on Financial Health

Understanding the difference between wants and needs can have a massive impact on your financial health. By ensuring that your basic survival needs are met first, you can avoid debt, save for the future, and have funds available for occasional luxuries. Not only that, but recognizing and addressing both physical health and mental health issues can prevent costly expenses in the future.

By reviewing the different wants and needs examples above, we can see that recognizing and understanding your wants and needs is more than just a budgeting exercise. It’s a conscious decision towards a satisfactory life, where making the right choices can lead to a balanced and fulfilling existence. By addressing fundamental requirements first and indulging in luxuries carefully, you can achieve both financial stability and a high quality of life. Remember, it’s not about going without, but about making choices that align with your life’s goals and values.

Frequently Asked Questions

What are examples of needs and wants?

Needs are essentials required for survival and basic well-being. Examples include food, water, shelter, basic clothing, and essential healthcare. Wants, on the other hand, are things that enhance our quality of life but aren’t strictly necessary. Examples of wants include designer clothing, luxury cars, gourmet foods, and high-end electronics.

Is a car a need or a want?

Whether a car is a need or a want depends on your individual circumstances. In rural areas or for jobs requiring travel, a car may be essential. However, in cities with good public transportation, it’s often a luxury. While basic transportation might be a need, opting for a luxury car when a simpler one suffices makes it a want.

How can I reassess my budget to better prioritize needs?

To better prioritize needs in your budget, start by listing out all your monthly expenses. Label each as a “need” or “want.” Examine the “wants” and see which can be reduced or eliminated. Ensure your “needs” are adequately covered first. Having financial goals can help you stay focused on prioritizing needs. Once needs are covered, allocate a portion of your budget to savings before considering wants.

Are there any tools to help differentiate between wants and needs?

There are several tools and apps designed to help with budgeting and differentiating between wants and needs. Popular budgeting apps like Mint, YNAB (You Need A Budget), and PocketGuard can help categorize and track your spending. Additionally, using a simple expense tracker spreadsheet or a dedicated journal can also be effective. It’s essential to regularly review and categorize your expenses, which these tools can facilitate.

How often should I revisit my budget to ensure I’m on track?

It’s a good practice to review your budget at least once a month. This allows you to adjust for any unexpected expenses and ensure you’re staying on track with your financial goals. Additionally, consider doing a more in-depth review quarterly or whenever there’s a significant change in your financial situation, such as a new job, a raise, or a major life event. Regular check-ins ensure you remain proactive about your financial health.

Author

Amber Aldridge

Amber Aldridge is a Lead Writer at MoneyMaver covering personal finance, budgeting, and debt management. Amber passionately champions the cause of individuals who feel excluded or overlooked in the present-day economy. She is deeply committed to supporting and empowering those who face challenges in today’s economic landscape. With her background as a teacher, she adeptly shares practical advice that truly benefits families striving to manage their finances. “Learning about and making the most of budgeting and debt management has profoundly transformed my life. Being a single mom of 2 kids, I draw from my real-life experiences, and love passing that knowledge onto my readers”.