Bethany's World

We all say that we know the difference between wanting something and needing something.

However, when it comes to budgeting, most of our logic can sometimes go out of the window. After all, the last thing we want to do is cut down on buying the things that we like most. 

Many people accidentally categorise the “wants” in their lives as needs just because they can’t imagine a life without them. However, the truth is that you don’t necessarily “need” a super-fast internet connection, even if it makes your life a lot easier. 

Now could be the perfect time to start thinking about your wants and needs from a new perspective. 

Separating Needs Vs Wants

The first step in separating your needs from your wants is asking yourself what you genuinely can’t live without. What are the bills that are going to keep coming into your life every month, whether you like it or not? 

Generally, this is going to include things like your rent or mortgage payments, your gas and electricity bills, as well as your health and life insurance. Other fees like car tax and car insurance may come into play if you have a vehicle – but a car could even be a “want” in some cases. For instance, if you need your car to get to work each day and earn an income, then it’s fair to say that your car is a “need.” Typically, this applies if you don’t have another way that you could get to work without spending more money or being late. 

If you simply want your car because it makes getting around easier, but you know you could simply get a bus or train to work, then you don’t need it. Examples of needs include:

• Rent or mortgage (Make sure you’re only paying for the house you can afford – not just the kind of house that you want)
• Loan expenses (Ensure that you’ve done your comparison shopping to ensure that you’re not paying more than necessary on interest fees)
• Food and hygiene (The lowest-cost items you can buy only apply here. For instance, you need soap, but you don’t need the highest-quality brand on the market)
• Utilities (Gas and electricity, water, and even broadband if you work from home) 
• Health and life insurance, as well as any necessary savings you put aside for “just in case” emergencies

Are Savings a Need or a Want?

Separating needs and wants can be easier said than done. 

It’s simple enough to come to terms with the fact that your Netflix subscription is a “want” and not a need. Additionally, your hair dye, regular trips to the salon, and various other things that are obvious “luxury” expenses are quite easy to categorize. 

However, not everything fits into a neat category. For instance, you know that you need to go grocery shopping every month because you can’t live without the food you survive on each week. However, things like cookies treats, and expensive brand items aren’t necessarily a need. 

One thing that definitely is a “need” however is savings. Yet many people classify their emergency savings, pensions, and other funds as a “Want” accidentally. The truth is that you need your savings to fall back on if anything happens in your life that you haven’t prepared for. Let’s face it; the world isn’t always predictable!

Your savings aren’t just there to help you accomplish your goals in life. They’re also the money you can turn to when you end up with a healthcare bill that you didn’t expect, or you need to replace a flat tire. Similarly, your pension is essential for ensuring that you can live comfortably when you get older and you no longer have a source of employment to pay the bills. 

Don’t make the mistake of thinking you can put your savings off until a later data. 

Using the 50/30/20 Strategy

If the concept of needs and wants has got you and your budgeting strategy in a spin, one way that you can remove some of the chaos and confusion is to try the 50/30/20 budget. This requires you to place 50% of your after-tax income into your needs, while you place 20% on your savings, and 30% on wants. 

With the 50/30/20 strategy, you don’t forget about the importance of savings, and you don’t have to give up on your “wants” to focus exclusively on your needs either. Instead, you take a more balanced approach to getting everything under wraps. Budgeting is a bit of an artform, but once you get your wants and needs sorted out, you’ll start to get the hang of it.