Wants vs. Needs: Budgeting Basics

This is Step 2 of our Budgeting Basics series. Start with “Understand What You Spend” (Part 1), then come back here to learn more about wants vs. needs and how to prioritize your spending.

Now that you’ve categorized your expenses and have a better idea of where your money is going, it’s time to better understand wants vs. needs in your spending so you can pick your priorities.

Needs vs. wants: Needs are things you must pay for to live and that support your basic well-being. Wants are things that make life more comfortable or fun, but you could cut back on without putting your health, safety, or ability to work at risk.

A simple test: If you can pause it for a month and still be okay, it’s probably a want. If skipping it would cause serious problems, it’s probably a need.

Because needs and wants depend on your job, age, or individual situation, the same item can fall into different categories for different people. Let’s look at an example of this:

If you’re building on Part 1 of our Budgeting Basics series, now is the time to revisit the list of expenses you mapped out in “Understand What you Spend” - you can build on your existing worksheet by categorizing each expense as a “want” or a “need.”

Looking for a separate worksheet on categorizing your wants vs. needs? Members have access to our fillable online worksheet here: Wants vs. Needs Online Worksheet. Members also have access to our kid-friendly printable on wants vs. needs to help our youngest learners begin building their budgeting knowledge.

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