Ultimately, it’s up to you to decide what falls into which category. Even a need as simple as shelter can drift into this grey area if you’re spending far too much on rent or a mortgage so you can live in a larger home or in a more upscale area. At the same time, no one would suggest that you need to dress in rags or exclusively shop at thrift shops, especially if proper presentation is important for your career.Ĭlearly there’s plenty of grey area between needs and wants.
But what about regularly taking cabs because it’s a little faster than the train? Or buying a new car because your old one broke down, but splurging on leather seats and other optional features? Buying a flashy sports car would probably qualify as a want, especially if you’ve already got a perfectly good vehicle.
But what about buying more expensive brands at the grocery store, or buying prepared food rather than getting ingredients and cooking yourself? While food certainly qualifies as a need, a dinner at a fancy steakhouse would clearly fall into the “want” column.However, it’s important to remember that there’s a lot of gray area when it comes to classifying needs and wants. In theory, you could survive just fine if all you had were these basics. Healthcare is also a need (though that, too, depends on your personal situation, and many young people skip health insurance or buy a cheap policy). Your rent or mortgage payment is absolutely a need, as are basic groceries, transportation to and from work, clothing and utilities like water and heat. In the table below, we go into further detail regarding needs and wants: Comparing Wants and NeedsĮxplaining the Overlap Between Wants and Needs Conversely, someone who simply likes getting dressed up would consider such clothing expenditures a want.
For example, a professional who is expected to wear a suit to work every day would consider such formal wear a need, as it’s essential to their career. But don’t forget that wants and needs may be different for any given individual. These opposing categories are a good starting point for anyone who’s building a budget. You might miss dining out, going on vacation or buying new clothes that catch your eye, but you could do without them if you needed to.
You should be able to cut wants out of your life without significant or long-term disruption. On the other hand, a want is essentially something that enhances your life and that you’d like to have, but that you can get away without having. Food, shelter, and transportation fall into this category. These are essential things that you cannot go any significant period of time without. You might also find it helpful to find a financial advisor in your area who can build you a financial plan.Īs you might expect, a need is anything that you genuinely have to have. But what actually constitutes a need or a want? Before you start building a budget, it’s crucial to understand what really fits into each of these categories, and to honestly and objectively evaluate your spending habits.