The Truth About Spending Money on Wants

By Karen Whaley

August 17, 2018


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.


In general, spending money on wants makes life more comfortable.


Most needs spending contains a component of wants spending too. Sure a family of four could survive in a one bedroom home, but we prefer (want) to live in a three bedroom home. Yes, you can wash the dishes by hand, but you desire to have a dishwasher to do it for you.

These may be extreme examples for some people.

The majority of you might object to such a drastic reduction of lifestyle. However, it shows the shift in how people used to live versus how they expect to live now. More realistic examples of modern day wants spending may be cable, dining out, and unlimited data on a mobile plan.

Often when people first start to budget and discover they are spending every dime they have (or more), it is the modern day wants the finance gurus tell you to slash from your spending. If you take the gurus standard advice, you should actively (and ruthlessly) cut all want expenses from your spending. I agree with this advice if you are consistently increasing your debt load each month or have a debt load that is preventing you from pursuing your goals and living your values.

However, when you dig a little deeper into human needs your perspective on spending money on wants tends to shift.

Human Needs

What most financial programs fail to recognize when eliminating all wants spending, is you have more needs than basic physical survival. In fact, it is these other non-physical needs which set us apart from most animals.


Humans were not meant to just survive, but to thrive in life. In order to thrive, you must also consider the needs that make us distinctly different than most animals. 


Psychologists will point out that as humans we have both physiological (physical/safety) and psychological (mental/emotional) needs.

The physiological needs are more concrete in nature and include things like air, water, food, shelter, sanitation, etc.

The psychological needs are a little squishier and include your ability to have competence, autonomy, and relatedness.

Your satisfaction and happiness in life are found when meeting all your physiological and psychological needs. Money is a tool you use to fulfill all your needs. Therefore, it does not make sense to squash all spending on the non-physical needs that make you distinctly human.

The 50/30/20 rule of budgeting recognizes humans have more than just physical and safety needs. The 30% spending money on wants portion of the rule, gives a nod to human’s psychological needs.

Yet, you still need to distinguish which modern day wants best fulfill your various psychological needs.

Distinguishing within your spending categories which spending supports your psychological needs allows you to gain power and control over spending money on wants. Further, it is through prioritizing these distinctive human needs (and their associated wants spending) that you maximize your spending satisfaction.

Prioritizing your psychological human needs when determining your spending is established by knowing what you want and refined using mindful spending.

The Truth About Spending Money on Wants

More traditional approaches to “responsible” money management would have you reduce or remove all wants spending from your budget. Removing all non-physical survival spending (wants) is often used when gaining control of your spending or first beginning to budget.

However, elimination of wants spending may unknowingly fling you into a yo-yo money diet. The danger to this extreme slashing of non-physical survival spending will impact you emotionally and mentally.

Yes, like any extreme dieting technique, it may generate fast and amazing results. Unfortunately, these results may be at the expense of your long-term successful money management.

You can only sustain extreme financial practices for so long before rebounding back to financial practices which fulfill all your human needs.

While the 50/30/20 rule for budgeting acknowledges psychological needs (see Maslow’s Hierarchy of Needs diagram above), it is only a starting point for spending money on wants. It is not an ending point.

Additionally, the 50/30/20 rule doesn’t address which wants spending creates lasting satisfaction. Nor does the rule mend your money relationship to achieve consistent wants spending aligned with your goals and values.


The truth about spending money on wants is the majority of your spending should be on wants. Wants spending is how you achieve the greatest spending satisfaction.


Wants spending satisfies your very distinctive human needs. The key to effectively spending money on wants is understanding both your individual psychological needs and how your current spending is or is not meeting those needs.

Attention to detail is a must when balancing financial needs and wants. There is not a one-budget-fits-all approach. Wants spending is essential to your lasting satisfaction. But neither can you ignore the financial peace found when ensuring your basic physical needs are met.

Each of you is a unique person, how you define and prioritize your own psychological needs determines how you should be spending money on wants to maximize your satisfaction. The goal of mindful spending is to create a lifestyle through spending money for your needs – not someone else’s.

What unique wants spending do you have?

Karen Whaley

About the author

Karen Whaley

Financial Lifestyle Coach
Certified Financial Instructor


I help clients use money to live - not live for money. If that sounds appealing, you are in the right place my friend!

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