Separating wants from needs is a great way to help you gain control over your spending habits and better manage your money. Consumerism is a major part of our society, and thanks to e-commerce, smartphones, free shipping, and unlimited delivery services, it's probably easier than ever to spend money. If you want to rein in your spending, start by focusing on needs and evaluating wants from there.
Identify Your Needs
Identify your needs. These are usually the things that you must have, such as:
- Food
- Clothing
- Shelter
- Healthcare
- Education
- Utilities
- Transportation
There may be others, depending on what you do for a living or your unique circumstances, but be sure to determine if it's something you need or if you'd really just like to have it.
Identify Your Wants
Once you've determined your needs, what you're likely left with are your wants. Examples of these might be:
- Entertainment
- Travel
- Designer clothes
- Home furnishings
- Gadgets
- Accessories
Determine Which Needs Are Really Wants
As Paula Pant at The Balance points out, it's important to identify needs that are really wants. You may think you need something, but if you really examine things, you will determine that it's actually a want.
"Whether an expense is a need or a want often depends on how and why you use it. Home internet may be a need for you if you work from home. However, if you only use your home internet for entertainment, such as browsing social media or playing video games, it is actually a want," Pant says, for example.* "Parts of an expense may be categorized as a need while others are a want. A grocery bill is a need because you need to eat. But if, along with your produce, protein, and whole grains, you also buy chips and soda, then some of those things are wants rather than needs."
As consumers, many of us have grown accustomed to things like smartphones and televisions, but unless you need these to help you make a living, they probably aren't really needed. Even if you believe them to be, are you looking at the less expensive model that delivers the features you truly need or are you paying for higher quality and extra features?
Prioritize Your Expenses
It's nice to prioritize expenses when it comes to wants and needs, even if affordability isn't a problem. You may simply wish to save money and address your spending on wants accordingly. On the other hand, if you're living on a more modest income, how you prioritize might be vital.
"Paying for shelter should always be the first priority, so you continue to have a roof over your head," says The United Way.** "If you pay for utilities, like heating and water, you may have a month or more to make your payment before having your service disconnected. Your food budget is a great example of an expense that is both a priority and something that you can adjust if you have more pressing bills to pay. There are probably items on your grocery list that can be removed to save money for other bills that month. Go through each expense on your list and make a note of any you can delay payment on or change for a brief period. The expenses left are your 'must pay' expenses for the month."
Set Bank Accounts Specifically for Needs and Wants
It might be helpful to set up separate bank accounts for needs and wants. This could work with either checking or savings accounts (or both). For example, in one account, you can deposit money that is specifically dedicated to paying your mortgage, energy/water bills, and for basic grocery staples. You could set up another account specifically for spending money that you can use on wants, whether these might be material items, entertainment, travel, or anything else.
Be sure you are adding an adequate funding amount to cover your needs on a regular basis, and make the wants account secondary. It is also highly recommended to save money for an emergency fund, which can help you if you find yourself in a pinch, and need money to cover your needs.
Separating your wants from your needs may improve your spending habits and help you develop better budgeting and saving habits.
* https://www.thebalancemoney.com/how-to-separate-wants-and-needs-453592