Budgeting – Drawing a Line Between a Want and a Need

One of the most common reasons why we fail to stick to our budgets is that we mix up what we need from what we want. In a time of hardships where prices of goods are going up and wage raises aren’t going to happen anytime soon, it’s important to tighten the belt to keep yourself afloat and free from debt. The balancing act is indeed precarious as you don’t want to skimp on needs either, as costly health issues may arise at any time. Thus, the trick is to delineate between your wants and needs. Among your needs, you also have to distinguish between those for the short-term and those for the long-term. Setting the line between wants and needs is a lot easier said than done, but when you appreciate and understand the necessity of differentiating one from the other, increased spending discipline will come naturally.

Needs vs. Wants

While the act of balancing your wants and needs may vary from person to person, there are needs that all human beings share. It’s important for you to prioritize those universal needs before you spend on anything else. ‘Needs’ are the things required for you to live. The following are the universal needs of humans living in modern societies required for them to survive in today’s world:

• – Nutritious food and clean water
• – Healthcare and hygiene products, including health insurance
• – Comfortable clothing
• – Shelter
• – Electricity
• – Education
• – Internet (access to which has been recently identified by the United Nations as a human right)
• – Funds for your funeral and burial

Anything else outside of these needs is considered a “want.” Junk food, automobiles, extra gadgets, label bags, big houses, cigarettes, alcohol, and other items that fall outside of these modern universal needs are considered “wants.” Wants are items you desire but do not necessarily require in order to survive. 

How differentiating needs from wants can save you money and reduce debt

Most people tend to have their priorities skewed because they have no idea of where their money goes. To give you an idea of how much money you’re wasting on wants at the expense of your needs, tally up the amount you have spent on your needs, as listed above. Deduct the amount you spent on your monthly needs from your monthly salary. Compare the difference you have obtained with the money you have remaining in hand or in your savings. 

If you have very little money compared to what you could have saved, that means you are spending too much on wants. Address this by prioritizing your needs in your monthly budget. The amount you have left in your income after deducting the amount you spent on your needs would be your savings. If you notice that you have savings that are too low, you have to adjust your expenditure. You must set aside that amount for emergencies that may arise. But if you are insistent on buying something outside of your needs, such as a new laptop, you better find yourself a sideline job that would enable you to raise the amount you need to buy that product.

While it can be argued that life is meant to be lived and not merely survived, the reality is “living life” comes at great cost, especially for the working class and people in poor countries. Today’s economy is precarious, save for the 1%. If you are among those who belong to the working class, the 99%, you have no choice but to stick to your needs. At best, you can redefine those wants to allow you to “enjoy” life at less cost. Otherwise, it’s indebtedness for you. You can’t also enjoy your wants at the expense of the things you need to survive as the negative consequences will render “living life” moot.

Make a budget plan to live within your means

You earned your money working hard, which means it should be spent on the right things. The only way to avoid overspending and indebtedness and boost your savings is for you to plan your budget. Given your monthly income, identify priority areas which you need to spend on. Impose daily spending caps. Ditch your credit card if you have one and don’t bother getting a credit card if you’re planning to do so. Spending caps and using cash instead of credit cards gives you more control over your expenditures, while still ensuring that you are getting what you need to survive.