Article

Deciding Between Wants and Needs

Deciding Between Wants and Needs

Are you looking for power and control over your own budget? One of the hardest things to do in life is realizing when a want is not a need. Not only is the choice subjective, it is often difficult to fit into simple categories. But in the long run, it’s the secret to sustaining yourself from day to day in building a budget that balances your needs with your wants and puts you in a better position to reach your financial goals.

March 21, 2023
Deciding Between Wants and Needs
Important Disclosure: Content on our website and in our newsletters is for informational purposes only. The information provided may (or may not) directly apply to your situation. We recommend that readers work directly with a professional advisor when making decisions in the context of their specific situation.

Budgeting is a balancing act. The secret to sustaining yourself from day to day while also reaching financial goals is building a budget that balances your needs with your wants. Pinpointing the difference between the two is a subjective proposition.

The “needs” that are really “wants”

In budgeting worksheets, some people object to separate categories for items in the “wants” category. Home internet, for example, is classified as a want and not as a need. But if you do not work from a home office (in which case your home internet is a business expense), there’s a good chance that home internet is a want (because let’s face it, you’re probably using it primarily to watch Netflix).

And the same is true for your cable television — your Netflix subscription and your iPhone as well. It also goes for your hair dye … These are all wants and not needs. You totally can do without these things, if you were forced to. They’re not necessary to live, as painful as it might be to lose them.

Cross-category needs and wants

Of course, wants and needs, sometimes, don’t fit into neat, distinctive categories. It’s too simplistic, for instance, to say that your grocery store spending is a need. Your entire grocery bill is a combination of wants and needs. Bread, milk, eggs, and whole fruits and vegetables can be classified as a need.

But, on the other hand, chips and cookies are most certainly not a need. Fruit juice is a want, especially if it is of that upscale variety. Milk is a need, but organic milk is a want. And so is the whole grain, organic honey-infused bread.

A lesson that can apply to your life

The 50/30/20 budget says that 50 percent of your after-tax income should be spent on “needs,” 30 percent should go to “wants,” and 20 percent should go to savings and debt reduction. That means there’s nothing wrong with buying fancy bread and milk or subscribing to Netflix. The 50-30-20 budgeting rule of thumb allows you to spend 30 percent of your take-home pay on things you want. The key is to separate your wants from your needs so that you’re more self-aware of how you’re spending money.

Takeaway

Distinguishing “wants” from “needs” will truly help you realize how much power and control you have over your own budget. If you’re choosing to spend money on wants, you easily can choose those items and re-direct your money elsewhere. After all, budgeting, at its very core, is not always about crunching numbers. Budgeting is the art of aligning your spending with your values.

Other content you may like

  • Podcast Highlight - Anticipating Fed Funds Cuts

    March 14, 2024
    The Strong Valley Team gives an update on the Fed Funds and examines the relationship rates have with compounding inflation.
    Read this Article
  • The 8th Best August Stock Performance since 1926

    September 7, 2020
    This special report looks at the historical market returns in the context of presidential elections, which parties are in control of Congress, and various government election outcomes. While nobody can predict the future, and past results don't guarantee future outcomes, this report gives some insights as to what the financial landscape might look like after the 2020 elections.
    Read this Article
  • Mid-Quarter Roundtable Highlights

    Podcast Highlight - Mid-Term Elections and the Investment Perspective on a Divided Government

    November 28, 2022
    Enjoy this highlight clip from the Strong Valley Mid-Quarter Roundtable discussion.
    Read this Article
  • Assess the Health of Your Business

    Assess the Health of Your Business

    January 16, 2024
    Taking a closer look at your company’s internal operations and external environment may help you avoid costly mistakes, improve your management practices, and refine your long-term strategic goals. There is an analysis tool that can help you hone your business strategy and strengthen your position in the marketplace.
    Read this Article
  • The link you have selected is located on another server. The linked site contains information that has been created, published, maintained, or otherwise posted by institutions or organizations independent of this organization. We do not endorse, approve, certify, or control any linked websites, their sponsors, or any of their policies, activities, products, or services. We do not assume responsibility for the accuracy, completeness, or timeliness of the information contained therein. Visitors to any linked websites should not use or rely on the information contained therein until they have consulted with an independent financial professional. Please click “Continue to Link” to leave this website and proceed to the selected site.
    phone-handset