Understanding Needs & Wants
In today's consumer-driven world, distinguishing between needs and wants can be challenging, especially with marketing constantly pushing us toward the next big thing. However, understanding this difference is crucial for managing your finances wisely and prioritizing your long-term goals.
What’s a Need?
A Need is something essential for survival or to maintain a basic standard of living. It’s something that directly impacts and improves your health, safety, or well-being. Need items are essential and typically would be kept if you lost your income or needed to cut spending.
Examples of Needs:
Primary housing (reasonable for your/your family’s needs)
Food and groceries (basic nutrition and meals)
Transportation (public transit, gas, or car payments)
Health care (insurance, medication, medical treatments)
Utilities (electricity, water, internet for work/school, phone)
Clothing for home and work
What’s a Want?
A Want is anything that improves your comfort, lifestyle, or enjoyment, but isn’t essential for survival or maintaining well-being. Wants often include things that bring temporary satisfaction but aren’t necessary to function day-to-day. A Want could be eliminated from your budget should you lose your job or need to cut spending.
Examples of Wants:
Clothing or accessories that’s not specifically needed (trendy items, another purse, shoes or extra clothes beyond basics)
Technology like Apple Watches, an iPad, or the newest phone
Ordering takeout, food delivery, or dining out instead of cooking meals at home
Vacations (including attending friends’ destination weddings)
Subscription services for entertainment or hobbies (streaming services, fitness apps)
Home décor, holiday decorations, or furniture that’s purely aesthetic
Pets and pet toys, accessories, or expensive dog/cat food
A vehicle that supersedes your basic transportation needs: luxury car, ATV, boat, or motorcycle
Tactics for Avoiding Unnecessary Purchases
Once you understand the difference between Needs and Wants, you can apply a few strategies to help avoid purchasing items that don’t align with your long-term financial goals. Here are some tips to stay on track:
Create a Shopping List: When you go shopping, make a list of the items you actually need, and stick to it. This helps you stay focused and avoid impulse buys.
Apply the 24-Hour Rule: Before making a purchase, especially for items that feel like “Wants,” wait 24 hours to see if you still feel the urge to buy. This gives you time to reconsider and evaluate the necessity.
Set Spending Limits: Designate a monthly amount for non-essentials, and once it’s gone, avoid further spending. This forces you to prioritize what’s most important to you.
Track Your Purchases: Keep a spending journal or use an app (like Simplifi, Rocket Money, or CoPilot) to track your purchases and categorize them as needs or wants. Reviewing this regularly can help you identify patterns and curb unnecessary spending.
Shift Your Mindset: Reflect on what brings you true value in life, whether that’s experiences, savings for the future, or investing in long-term goals, rather than succumbing to the pressure of acquiring new things.
By clearly identifying your needs and wants and implementing these strategies, you can reduce impulse spending, manage your finances more intentionally, and put your money toward the things that truly matter.
