Needs Vs. Wants

Elmo Explains it for you.

Watch this video to hear Elmo explain the difference between a Want and a Need!

 

A Need is in the Eye of the Beholder.

If you are still confused do not worry.  This is one of the toughest aspects to understand about budgeting.  Many people mistakenly categorize certain items as "needs" because they cannot imagine life without it.  But when push comes to shove, many of your needs are actually wants.

Elmo said it all: Sometimes our wants are so powerful that we feel we cannot live without something.  We would feel like Cookie monster-without a cookie.  But, a cookie is a Want, not a need, no matter how much you love it!

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Understanding Needs and Wants

Needs

You've probably heard people say, "I need that pair of jeans" or "I have to see that movie".  Maybe you've said those things yourself.  But will something horrible happen if you don't have those designer jeans or see that movie?  Probably not!

Needs are things that you truly cannot live without.  A person has very few true Needs.  Needs can be broken down into two broad categories: Absolute Needs and Near Needs.

Absolute Needs are things that are critical for your basic survival and they are:

  • Food
  • Shelter
  • Clothing (and I don't mean with a designer tag)

Near Needs include things like:

  • Utilities
  • Reliable transportation
  • Personal care expenses

Of course it is unrealistic to expect a person to thrive with only these items.  But you cannot have your Wants until your Needs are taken care of.

 

Wants

Once you understood what a true need is, understanding a want is easy.  Virtually everything else falls into the category of a want and could be cut out if necessary.

Additional wants can even be found in my previously identified list of needs. For instance, you need to eat, but you do not need to eat filet mignon every day. You need shelter, but you do not need to live in a single in South Apartments. Clothing is the same, a designer label on everything is not necessary for survival. So within each of the needs categories, there is almost always room to cut back.

Another example: Internet at home is classified as a want, not a need.  Most people associate internet as a need. But unless you work from a home office (in which case, your home internet might be a business expense), there’s a good chance home internet is a want. (If you're using it primarily to check Facebook, watch YouTube videos, find recipes, and upload photos-it's a want.)

The same is true for your cable television. Your Netflix subscription. Your iPhone. Your hair dye. These are all wants, not needs.

The key is to separate your wants from your needs so that you’re more self-aware of how you’re spending money.

Distinguishing wants from needs will help you realize how much power and control you have over your own budget. If you’re choosing to spend money on wants, you can easily choose not to buy those items and redirect your money elsewhere.

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Page last modified March 4, 2014