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?
7 Comments
Christine @ The Wallet Diet
I have colleagues who cab or drive into work because they don’t like taking the subway. I think that’s such a waste. Sure, I would much rather sit in the comfort of my own car but the extra cost to pay for car expenses plus parking isn’t worth it.
You can turn a need into a want by buying into more than what is necessary. I think as long as you are able to live comfortably, there’s no need to pay any more than you have to!
TLC
Needs are similar. Shelter/utilities, food, transportation (public transport is nill where I live, so this includes a car/gas/maintenance/insurance, taxes), clothing, prescriptions. If things got desperate.. I could scale those back. I have plenty of clothes to last me a long time, I could visit the clinic for my birth control, eliminate all eating out, & potentially move in with my Dad (however, doing so would put a strain on my car due to how far he lives from my job). I also consider health/dental/vision insurance a need for me. Along with a phone of sorts (job hunting if I lost mine, emergencies, etc). But I could scale back to the cheapest possible plan w/o data & texting.
A few of my personal splurges are owning a pet, my photography hobby/side business, eating out, shopping for updated clothes, traveling, my galaxy S4, outings like movies, etc. Lots more I could list of course.
Linda Lay-O'Brien
Nice
Alan Z
We are living in a world where we are constantly bombarded with the latest gadgets, newest shoes, and the fanciest cars online/social media. It is so easy to charge your credit card and spend money on things you don’t need.
Before buying a big ticket item, always ask yourself why you need it? Sometimes, it helps to have a cool off period and think about the practicality of the purchase before buying that $30K RV or the latest $1200 phone.
Every month, go through your budget and see where it needs to be changed. You need to have a monthly savings goal for your money. Whether is it $500, or $5000. Knowing where you are spending the money, and tracking it will help you understand your behaviors and build better money habits.
I was a financial planner/advisor for 16 years and help people with their finances/budget, investing, and real estate advice.
MoneyMatters.care