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Why you should know your needs and wants
Understanding the difference between needs and wants is essential for maintaining a balanced and healthy lifestyle.
Needs are the basic necessities that are required for survival, such as food, water, shelter, and clothing. On the other hand, wants are the desires that are not essential for survival but can improve our quality of life.
Examples of needs and wants can vary depending on an individual’s lifestyle, culture, and personal preferences. For instance, a person living in a cold climate may consider heating as a need, while someone living in a warmer climate may not.
Similarly, a person who enjoys music may consider a high-quality sound system as a want, while someone who is not interested in music may not.
By understanding the difference between needs and wants, individuals can prioritize their spending and make informed decisions about their lifestyle choices. It can also help individuals to identify areas where they may be overspending on wants in their monthly budget and neglecting their basic needs.
In this article, I’ll go over some examples of needs and wants to provide a better understanding of how these concepts apply in our daily lives.
Definition of needs and wants
Needs and wants are two concepts that are critical in understanding how people make decisions about what to spend their money on.
The distinction between needs and wants is important because it helps people prioritize their spending.
When people have limited resources, they need to make decisions about what to spend their money on. By understanding the difference between needs and wants, people can make more informed decisions about how to allocate their resources.
Let’s go over the definition of needs and wants.
What are needs?
Needs are those things that are considered basic requirements for human survival and well-being.
These are things that people cannot do without, and they include things like food, shelter, clothing, and healthcare.
The awareness of necessities in life will drive our behavior to prioritize and pursue attaining those needs. When we do, we experience a more stable, secure, and healthy life.
Those who require fewer needs to be met tend to be more satisfied. These people have the self-awareness to understand how being content with less is the key to real happiness.
What are wants?
In contrast to needs, wants are things that people desire but are not essential for their survival.
These are things that people can do without, and they include things like luxury goods, entertainment, and travel.
Of course, our most basic needs (like food and shelter) must be met before pursuing additional comforts that are unnecessary.
If you prioritize wants over needs in your life, you can put your security, safety, and mental and physical health at risk.
It is also important to note that needs and wants can vary from person to person and from culture to culture. For example, what one person considers a need may be considered a want by someone else. Similarly, what is considered a need in one culture may not be considered a need in another culture.
Overall, understanding the difference between needs and wants is critical for making informed decisions about how to allocate resources. By prioritizing needs over wants, people can ensure that they are meeting their basic needs and living within their means.
Examples of needs
Needs are things that are necessary for a satisfactory life. They are essential for survival, growth, and development. The following are some examples of needs:
- Food and water – These are basic physiological needs required for survival.
- Shelter – A place to live that provides safety and protection from the elements.
- Clothing – Clothes provide protection from severe weather.
- Healthcare – Access to medical care is necessary for maintaining good health.
- Education – Education is essential for personal and professional development.
- Transportation – A means of transportation is necessary to get to work or school.
These are just a few examples of needs that are essential for living a satisfactory life. However, needs can vary from person to person and can depend on factors such as age, gender, culture, and socioeconomic status.
It is important to note that needs are different from wants. Needs are essential for survival and well-being, while wants are desires that are not necessary for survival.
Let’s go over some examples of wants in life.
Examples of wants
Wants are specific motivations that are an extension of needs. They are often shaped by social and cultural factors, and can vary widely from person to person.
Here are some examples of wants:
- A luxury car with all the latest features and technology
- A designer handbag or other high-end fashion designer items
- A vacation to an exotic destination
- A large, luxurious home with all the latest amenities
- A high-paying job with lots of perks and benefits
- A collection of rare or valuable items, such as art or antiques
- A wardrobe full of expensive clothing from top fashion designers
These are just a few examples of wants that people may have. Wants can be influenced by a variety of factors, including advertising, peer pressure, and personal goals and aspirations.
It’s important to note that wants are not necessarily bad or negative. It’s natural and normal to have desires and aspirations, and pursuing those desires can bring happiness and fulfillment.
However, it’s also important to be mindful of your wants and to make sure they align with your values and priorities.
Difference between needs and wants
Needs and wants are two concepts that are often used interchangeably, but they are actually quite different.
Understanding the difference between needs and wants is important for making wise decisions about how you spend your time and money.
Here are a few key differences between needs and wants:
|Essential for survival||Not essential for survival|
|Universal||Varies from person to person|
|Stable over time||Can change over time|
|Easy to measure if needs have been met||More difficult to measure if wants have been met|
|Must be prioritized in a budget||Optional in a budget|
|Cannot be delayed or suspended||Can be postponed or eliminated|
Needs include resources like food, water, shelter, and clothing. Without these things, a person cannot survive.
Needs are considered universal, which means that everyone needs them regardless of their age, gender, or cultural background.
Needs are also stable over time, which means that they do not change much from one day to the next.
Wants, in contrast, are things that are not necessary for survival. These include things like luxury items, entertainment, and hobbies.
Wants vary from person to person and can change over time. For example, a person may want a new car one day and then decide that they no longer want it the next day.
Focusing on your needs first can help you ensure that you have the essentials for survival before spending money on wants. This can help you avoid financial problems and ensure that you are able to meet your basic needs.
Why needs and wants are important in budgeting
Determining your needs and wants will ultimately shape the structure of your budget and dictate how you spend your income.
Of course, it’s crucial that you have enough income to meet your most essential needs. You must use some of your income for basic food, shelter, and clothing. However, many people get confused by what “basic” means.
For example, the parents of 3 kids may choose to believe that a 4-bedroom house with a large backyard is a “need” for their large family. However, they would be able to survive with smaller living conditions.
When we confuse true needs with unnecessary wants, we can get into a pattern of spending more than we really need to.
How to create your budget categories for needs and wants
Now that you know the difference between needs and wants, you might want to know how to determine categories in your monthly budget.
The percentage of your income that you allocate toward your needs will depend on your financial situation. If you have a lot of excess income, you may be able to keep your needs budget to less than 30% of your take-home pay. But, if you’re just making ends meet, you might need to set aside over 60% of your salary toward your needs category.
Here are a few budget categories that would be considered needs:
- mortgage or rent payment
- utility bills
- basic personal care items
- gas / transportation costs
- basic wardrobe
- health/car insurance
- debt payments
- college tuition
Here are some spending categories that you would list as wants in your budget:
- dining out
- charity contributions
- designer clothing/accessories
- monthly subscriptions (gym, food delivery, streaming services, etc.)
- beauty treatments
- hobby expenses
- travel / vacations
- life insurance
There are a wide variety of budgeting methods that will allocate various percentages to needs vs wants in a spending plan.
Here’s a list of different budgeting styles you could consider:
- 60-30-10 Budget: This budgeting plan requires 60% of your income to go toward financial goals such as savings, investing or debt payoff. Then, 30% is allocated for all of your necessary expenses. The last 10% is for unnecessary expenses. This budget is appropriate for those with a high amount of discretionary income.
- 50-30-20 Budgeting Rule: Created by Senator Elizabeth Warren, this spending plan keeps your essentials to 50% of your after-tax income. Then, you leave 30% for any unnecessary expenses and 20% for savings and debt reduction.
- 30-30-30-10 Budget: This method divides income into four budget percentages. The first 30% is for all homeownership expenses. The next 30% is for all additional necessary expenses. The third 30% of your income goes towards savings and debt payoff. And, the last 10% is for discretionary spending.
- 60/40 Budget: This very simple budget method includes just two broad categories. The first assigns 60% of net income to all necessary expenses, and 40% to everything else. Easy peasy!
- Zero-based Budget: This budget method accounts for every dollar of income, which means that all of the money you make in a month should equal all of the money you spend. This is why it’s also known as the “zero-sum” budget, because you should have zero left at the end of the month. With this spending plan, you determine the percentages you allocate to each category.
What are the pros and cons of needs vs wants?
There are benefits and downsides to both the needs and wants in our lives. Knowing how to appreciate and be prepared for the pros and cons of each will help you make better financial decisions and keep a healthy perspective.
Pros of needs
The benefits of the necessities for survival in life are obvious: they help us endure day-to-day living and provide the resources to carry out basic responsibilities.
Without our essential needs being met, we could quickly fall into a crisis that compromises our safety and well-being.
Cons of needs
Having needs in life means that, as humans, there are external resources that we must rely on in order to survive and thrive.
If we do not have access to these necessary resources, then serious consequences can occur. These include homelessness, bankruptcy, severe illness, and even death.
Pros of wants
The wants you have in life are beneficial for developing the motivation and inspiration to reach your achievable goals.
These aspirations give a person a greater sense of purpose and fulfillment, and can lead to a higher quality of life.
Cons of wants
Sometimes what you want out of life is either unattainable or outside of your capacity to achieve. This can result in feelings of dissatisfaction, anxiety, stress, and even depression or other mental health issues.
Also, sometimes our desires can be so strong that they drive us to make bad choices. It’s important to exert self-control when it comes to striving to fill the wants we have in life.
Does everyone have the same needs and wants?
Basic needs, like food, water, and shelter, are common among all people. However, there may be other needs that differ. For example, some cultures may not prioritize insurance or education as a need, but others will. Wants will vary widely among all people, depending on personal circumstances.
How do I prioritize needs in my budget?
To prioritize needs in your budget over other unnecessary aspects of life, you first need to ensure that you make enough income to cover all of your basic needs. If your monthly rent is so high that you can’t afford enough food, then you’ll need to make an adjustment in your living situation. In order to not run out of money before all of your needs are paid for, financial experts recommend to always spend your income on your needs first. Then, whatever is left over, can be spent on unnecessary expenses from time to time.
What is Maslow’s Hierarchy of Needs?
In 1943, the psychologist Abraham Maslow defined five categories of human needs that dictate human behavior. Starting with the most basic needs, these include physiological (for survival), safety, social, esteem, and self-actualization.
When does a need become a want?
When you “add” qualities to a need that are not necessary, then the need becomes a want. For example, we all need reliable shelter to survive. Buying a home with basic features (kitchen, bathroom, bedroom, etc.) is considered meeting that need. However, when you purchase a house with excessive rooms and space, a pool, 3 car garage, and an acre of land – then you are no longer meeting a need. You are fulfilling a want.
Why is it important to identify needs and wants?
Knowing how to differentiate between your needs and wants will help you make better decisions in life. Most people have limited financial resources, so there will always be choices we must make for how we spend our money. When we prioritize our spending – first on needs, then on limited wants – then we can live safe, secure, and satisfied lives.
Understanding the difference between needs and wants is essential for managing personal finances and making sound financial decisions. Needs are requirements for life, such as food, shelter, clothing, and healthcare, while wants are things we desire but can live without.
Some examples of needs include basic living expenses like rent or mortgage, utility bills, and healthcare. On the other hand, examples of wants include luxury items like expensive vacations, designer clothes, and high-end electronics.
It’s important to prioritize needs over wants and avoid overspending on unnecessary items. By focusing on our needs and making wise spending decisions, we can achieve financial stability and security.
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