Managing your money well requires understanding the difference between needs and wants, which helps you control your spending and build financial stability. Here’s how to distinguish between the two and make informed financial choices.
What are needs?
Needs are the essential items or services required for a basic standard of living, such as:
- Food: Nutritious groceries and meals.
- Shelter: Housing or rent.
- Clothing: Weather-appropriate clothing and work attire.
- Healthcare: Necessary medications and basic health services.
- Transportation: Reliable transport for essential travel.
Without these, your day-to-day life and health would suffer and focussing on these first is key to budgeting effectively.
What are wants?
Wants, are non-essential extras that improve your quality of life, such as:
- Subscriptions to entertainment services such as Netflix or Spotify.
- Eating out at restaurants.
- The latest gadgets or luxury brand-name clothing.
- Vacations.
Understanding which purchases fall under “wants” helps you avoid unnecessary debt and overspending.
Making the most of needs vs wants
Set budget priorities: Start by making a budget that lists needs and wants separately. Allocate funds to cover needs first before setting aside money for wants. Bayport has budgeting tools and free courses to guide you.
CLICK HERE to access them.
Control impulse buying:
Impulse buys are often emotional rather than essential. Pausing before each purchase and asking, "Is this a need or want?", can help prevent overspending. Practicing this self-control will gradually align your spending with your priorities. Building financial discipline: Recognising the difference between wants and needs helps you build the discipline, which is essential for reaching long-term goals like buying a home, saving for education, or retiring comfortably. Knowing when to stop spending on wants means you can allocate more money towards building a stable financial future.
Avoiding unnecessary debt:
Many people accumulate debt by spending too much on wants. By focusing on your needs and budgeting carefully, you’ll reduce the temptation to rely on credit for non-essential purchases.
Aligning spending with goals:
Differentiating wants from needs to stay on track with financial goals. If you are saving for something important, avoiding other wants will help you reach your goal faster. Knowing the difference between wants and needs is essential for financial wellness. By prioritising needs and managing wants, you can take charge of your financial future, making every cent count towards your goals.
