When creating a budget, it’s important to understand the difference between needs and wants. Needs are the basic necessities required to survive, such as food, shelter, and clothing. Wants, on the other hand, are items or experiences that you would like to have, but are not essential for survival.
Here are a few examples of needs and wants:
Needs: Rent/mortgage, utilities, groceries, transportation
Wants: Eating out at restaurants, buying designer clothing, purchasing expensive electronics
When budgeting, it’s important to prioritize your needs before your wants. This means allocating the majority of your income towards covering your basic needs and only spending money on wants after your needs are met.
It is also important to note that, what may be considered a want for one person may be considered a need for another. For example, a person with a physical disability may need an electric wheelchair, while a person without the same disability may consider it a want.
Additionally, it’s important to be mindful of the difference between a one-time want and a recurring want. For example, purchasing a new car can be a one-time want, but the recurring costs of maintaining and fueling the car are ongoing needs.
By understanding the difference between needs and wants and prioritizing your needs, you can create a budget that allows you to live within your means and save for your future goals.