One of the largest challenges to creating and managing a personal budget is understanding the difference between needs and wants. Spending money on wants is often the first thing personal finance gurus will tell you to cut in their budgeting tips. However, the truth about wants spending is much more complicated and (more important to satisfaction) than any needs spending.
Financial Need Vs Want
First, let’s define financial needs and wants.
Needs: Spending on good or services required for basic survival without which an individual would die. Needs spending includes basic shelter, food, clothing, healthcare, etc.
Wants: Spending on goods or services that are not necessary for basic survival but that we desire or wish for. Examples of wants spending include dining out, going to the movies with friends, buying brand name vs. generic, etc.