Everyone has things they need, and everyone has things they want — and most of the time, these things cost money.
We all know it’s more important to pay for the things you need than the things you want, but what’s not always so clear is whether a particular expense is one or the other.
So why is knowing the difference between a need and a want so important — and if it is, how can you decide which is which?
Why knowing the difference matters
Why does it matter whether something is a need or a want, so long as you can afford it? Well, the clearer you are about what you’re spending your money on, the easier it is to make sure you have everything covered — and that means less stress in the long run.
If an unexpected expense comes up — say your bike is stolen, or your laptop is broken, or your lose your phone — then you’re going to have to adjust your spending. That’s much easier to do if you’ve already got an idea of which of your expenses are needs that you absolutely have to pay, and which of them you can afford not to worry about.
Understanding your expenses can also help you identify ways to cut back on spending if you have something you want to save towards, or if your circumstances change and you have to make adjustments.
It just makes sense to have a clear picture of what you’re spending, why you’re spending it, and how important each expense really is.
Deciding which expense is which
Knowing whether an expense is a need or a want is important to help you plan your spending and stay on top of your finances — but how do you decide which is which?
You can’t escape from necessities. They’re always there, needing your attention. Staying on top of the necessities is a big part of life, and that means keeping your necessary expenses covered.
So say you want to buy yourself a dress, or a new pair of sneakers — you need clothes, and you need shoes, so that’s a need, right? Or if you want to buy take out for dinner every night, well, you have to eat — so does that make buying take out a need, and not a want?
Sure, clothes and food are definitely necessities, but deciding whether something is a need or a want isn’t about what kind of thing you’re paying for. It’s about whether or not the expense is a priority. The more important an expense is, the higher on your priority list it will be.
There’s an easy way to decide how important an expense is: ask yourself what would happen if you didn’t pay it. If you didn’t buy yourself clothes, you’d have nothing to wear, and if you didn’t buy yourself food, you’d have nothing to eat. Those things are pretty important — more important than if you had to skip a concert, or if you couldn’t afford a night out with friends.
That being said, the goal isn’t to neglect your wants for the sake of your needs. It’s to make sure your needs are covered, so you have enough money left over to do what you want. Mastering your money is all about being in control, so you have the freedom to make the decisions you want to make, and not be constantly constrained by necessities.
So when you’re shopping, or when you’re planning your spending, ask yourself: Is this a priority? Do I need it, or do I want it — and if I want it, can I afford it and still cover my needs? That will give you a good understanding of whether your expense is a need or a want, and knowing will help you make better decisions about how you spend your money.