November 18, 2018
Learn how to tell the difference between wants and needs to build a realistic budget. Discover practical tips for mindful spending, financial planning, and creating lasting money habits that fit your lifestyle.
Coming up with an effective budget is easier said than done. In most cases, it will require some serious soul-searching. Spending habits are often deep-rooted impulses that can slip through the radar of your most conscientious budgeting efforts.
Knowing the difference between your wants and needs will help you create a budget that works for your situation. By clearly defining what is essential to you and what you want to live without, you’ll be able to make informed spending decisions and improve your overall financial health.
What’s the difference between a need and a want? A need is something you can’t live without, and a want is something you’d just like to have, right? They’re the same for everyone, aren’t they?
Actually, no it’s more complicated than that.
Wants and needs vary widely from person to person due to a variety of factors, including lifestyle, personal values, geographical location, and individual circumstances. What one person considers essential can be considered unimportant to someone else.
For instance, someone who values fitness and health might see a gym membership or exercise equipment as a necessity, while another person might view it as a non-essential expense.
Where you live can also influence your needs. Someone who lives in a city with good public transportation may see owning a car as a luxury. In rural areas, though, it could be essential to have one.
Understanding what is important to you is crucial for effective budgeting and financial planning.
While some of your needs may be unique to you, there are others that will be standard for us all. These include:
You’ll need to set money aside for each of these every month, the best way to find out how much you’re spending on each is to track your spending. You can do this with a pen and paper, in your phone, using a spreadsheet you create on your own or our own budget planner.
Part of having a healthy budget and using it to help you achieve your financial goals is knowing what you really want in life.
If you love going out, buying expensive electronics, or getting on a plane for a trip once a year, your budget should be able to accommodate these costs.
Having a budget that identifies your wants and needs should allow you to always afford your needs while saving towards any of your bigger wants. A budget allows you to see what you can spend. It’s not about finding out what you can’t buy.
The problem arises when you have trouble prioritizing your wants over your needs. Having a “treat yourself” attitude can definitely go too far.
Practicing mindful spending is key when it comes to creating a budget. Mindful spending means consciously spending money on items and experiences that align with your values and priorities, while minimizing how much you spend on non-essential or impulsive purchases.
It also helps to know why you want something. When you’re creating a budget, it should channel your wants and help you realize what is really important to you.
Telling wants and needs apart can be hard sometimes. One of the best ways to avoid impulsive spending on is to use the 24-hour rule. The 24-hour rule means waiting a full day before making a large expensive purchase.
During this waiting period, take the time to assess whether the item is truly essential to your daily life or if it is a fleeting desire that can be set aside. This pause allows you to differentiate between immediate gratification and genuine necessity, empowering you to make mindful and deliberate spending choices.
You do not need to use this rule for every large purchase, if your fridge breaks for instance you’ll need a new one as soon as you can get it, but when shopping online with your credit card, this is a good way to help you distinguish your wants from needs.
Evaluate the long-term value and impact before making a purchase. Will it provide long-lasting benefits or bring momentary satisfaction? Ask yourself if the item or experience will contribute to your overall happiness and well-being in the long run or if it will lose its appeal quickly. Prioritizing purchases that offer lasting value can help you differentiate between wants and needs.
Regularly evaluating your spending habits and making adjustments can help you avoid overspending. As your circumstances and priorities change over time, it’s essential to reassess your wants and needs. What may have once been a need could become more of a want, and vice versa. By regularly reviewing and adjusting your budget, you can ensure that your spending aligns with your current situation and financial goals.
If you’re falling behind on bills and struggling to get your finances in order, we can help. One of our Licensed Insolvency Trustees can help you turn the situation around.
During a free consultation they can assess your financial situation and provide you with a range of options to help you get back on track. They’ll work closely with you to understand your goals and develop a tailored plan to help you achieve financial stability.
November 18, 2018
Learn how to tell the difference between wants and needs to build a realistic budget. Discover practical tips for mindful spending, financial planning, and creating lasting money habits that fit your lifestyle.
