Needs vs Wants: A Budgeting Dilemma That Could Be Making You Poor

Two people could debate for hours on end about whether a particular product or service is a need or want. The circumstance and the frames of reference are of much importance in this discussion. What a person needs, another wants, and what another wants another person needs. Also, there are several ways to meet a need or a want.

For instance, food is essential for our survival. We need it. But does that mean that we have to eat chicken tikka with chips masala or biryani with chicken stew and some white wine? At first glance, it can be easy to assume the difference between needs and wants.

When you start getting into it, the differences can be difficult to articulate.

Needs, Wants, and Their Differences

The word "want" is a term used to refer to a strong desire to have or possess something. It may be something abstract as well as concrete. Wants aren't necessarily part of your daily living routine. And you can, easily, live without them. Wants may include things such as:

• Travel
• Entertainment
• Designer clothing
• Gym memberships
• Coffee dates
  

On the other hand, "needs" represents the things that are a must-have for one to live a healthy, content life. These include:

• Food
• Water
• Shelter,
• Clothing
• Transport
  

You need to choose wisely what your needs are and what your wants are. Where you have to spend your money and where you have to make some compromises.

So, Do You Have to Do Away with All Your Wants?

It is not like almost removing all the fun completely from your life. It is just about mining through those things in our lives that we don't need as we thought when we wanted to buy them, for example, the many decorative things.

It is not about leaving your desires altogether and compromising so extremely to the point where you don't feel good about it, but to make it less so that you can afford a simple yet elegant life that fits within your budget.

Budgeting for Your Wants and Needs

When you can discern between your needs and wants, you can make a clear picture to manage your budget plan accordingly.

After going through your needs and wants, there may be some overlap. For example, when looking for a house to rent – which is clearly a need, you may have to decide between a one-bedroom and a two-bedroom house. You may want the two-bedroom, but you may only be really needing the one-bedroom.

Or you may need a raincoat, but want the designer one – which could be a few thousand shillings more.

It is thus important to objectively look at your needs and wants, and decide where each fits in and how it impacts your overall financial well-being.

The first thing is to write down all the things you think you have to get and put them into categories. Tracking your spending may reveal that what you think is a need to have, is actually just a nice thing to have. From a needs perspective, here are some ways to find extra money in your budget :

• When shopping, look out for goods on sale or with discounts.
• Shop for a better mobile plan
• Shop for better insurance rates
• Strictly sticking to a budget
• Actively working on increasing your savings
  

The same applies for wants. You could manage your wants more effectively by:

• Eating out less often
• Buying fewer clothes
• Planning out treats for yourself way in advance
• Living in a modest house (one that best matches your income)
  

Start off by listing all the things you usually buy. Thereafter, group them into categories like toiletries, phone bills, food & drink, insurance, leisure etc.

Divide the categories into two buckets: wants and needs. We would place insurance and a basic phone plan under needs, but a Netflix subscription will more than likely fall under wants. Tally the totals and align your priorities.

A nice and effective place to start would be to use the 50/30/20 budgeting rule. This rule dictates spending 50% of your income on needs, 30% on wants and 20% on savings and paying off debt.

If your expenditure is disproportionate based on the list you made, you can make adjustments as follows:

• Move things around. Some of the items you’ve indicated as needs may actually be wants, or vice versa. Move them around.
• Cut spending on needs. The money you spend on needs isn't always fixed. Shop around for a better rate on your phone plan, cable package or even your insurance to save money on your needs.
• Cut spending on wants. Consider downsizing your wants if they’re taking over your budget. Limit how many days you dine out, for example, or opt for more affordable lodging the next time you travel.
  

Why Is It Necessary to Know Your Needs and Wants?

Knowing your needs and wants will help you adjust to your monthly plans and put something in your savings account more often. There are so many things in your usage that are merely your wants. Some things that you need are of greater importance than others, and others are of lower importance. The same concept applies to your wants.

For example, having a car can be your need but upgrading to the latest luxury model may not be exactly something you need in your financial journey. Unless of course, you are a person of means - and a luxury car serves your business/status ventures more than modesty. 

Some extraordinary or high profile people like famous personalities and other public figures are expected to have such vehicles. These could be their needs, not wants.

Wrapping up

Once you can differentiate between wants and needs, you will see that you are able to fulfil more of your desires over the years than you realize. And that can be a major turning point. When you find that there are things that you want to buy or do and you can't afford them, it is easier to focus on those things to the point of overlooking what you already possess. 

Take some time to ponder on all the ways you have been fortunate and the needs you have been able to meet every day. Once you get clarity about your wants and needs, you will have a basis for a healthy budget that offers an efficient and relatively painless way to cut down on spending. Give it a try, will you?