by Cyndi Li

Created on: November 04, 2008   Last Updated: November 12, 2008

Having a budget and sticking to it is a great way to avoid getting into serious debt. If, however, you've set up a budget and it doesn't seem to be as affective as it once was, it's probably time to reassess what constitutes a need verses a want.

The easiest way to do this is to review each line item on your budget and determine the necessity of it; either in part or in whole. Many times you'll find places you can trim or eliminate altogether that will decrease your expenditures and increase your savings.

For instance, does your cable television package include a number of premium channels? If so, do you really need them or are they a luxury? How about the television itself? Is a 50 inch plasma with high definition a need or a want? It might be cool to watch your favorite flicks on such a large screen, but if it comes down to a good movie or having enough money to put fuel in your car, which is the better choice? Now let's look at that car.

In an age gone by a car was considered a want. Folks still got to work, did the grocery shopping, and gathered for communal time without one. It could be well argued that in this current age the automobile has become a need.

People travel longer distances to work. The local Ma and Pa stores of yesterday grow fewer with each passing year; slowly being replaced by big box retailers that are sometimes located miles away. In light of this, no one could reasonably argue against the fact that, nowadays, an automobile is a necessity. The question then becomes, is there a need to own the latest model, luxury vehicle complete with all the bells and whistles, when a basic car is more than adequate enough for these purposes?

While these two examples seem easy enough to determine if they are a need or a want, deciphering the difference between the two isn't always black and white.

It goes without saying that clothing, housing and good health are a need. But, what sort of clothing do you need, and what is considered sufficient housing? Often times we satisfy our needs in such a way, they quickly become exaggerated wants.

It would be nice to walk down the street with an imported hand bag over your shoulder, a diamond laden bracelet adorning your wrist, and a pair of couture shoes strapped to your feet, but those are exaggerated needs. Simple, basic clothes and footwear are all any of us really need.

Just like the clothing, a simple house will suffice for shelter. One with droves of living space, complimenting it with the latest home fashions, and multiple electronics isn't a need; neither is landscaping the yard as if it were being photographed for Better Homes and Gardens. You don't have to settle for a run-down two room shack, nor do you have to restrict yourself to the barest of furnishings, but at the end of the day all those other things are still wants.

An adequate amount of exercise is important for overall good health also. But, is that pricey gym membership or the expensive piece of work-out equipment that's cluttering up your living space the only way to achieve it? You can just as easily go for walks, do calisthenics or ride your bike.

Practically speaking, take a look at what you think you need, and honestly ask yourself if you could live without it. If you can, then it's a want, not a need.

Take a critical account of your spending habits. Earmark your earnings for your needs, and save those wants for a rainy day. You'll be better able to meet your financial obligations during this economical crunch.

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