by Marco Angioni II

Created on: February 02, 2010

Many people may think that identifying the difference between a "need" and a "want" should be a fairly easy task.  However, there are many different things that need to be considered.  For example, all of us would classify food as a "need."  We cannot live without it.  As such, classifying it as a necessity or a "need" seems completely reasonable.  I agree that food is a "need," but the inquiry does not stop there.  Many kinds of foods exist.  For example, would you consider a $50 beef tenderloin steak a "need"?  It is food and therefore, based on our previous example, it should be considered a "need."  Obviously, however, it is more complicated than this.  As such, you need to carefully consider every item on your budget before classifying it as a "need" or a "want."

Breakdown Each Category Carefully:

As was shown in the example above, simply because something may fit into the "need" category does not automatically make such item a "need."  Each item in each category needs to be carefully analyzed to determine whether it fits into your budget.  You may have room in your budget for buying steak, but probably not beef tenderloin.  You may have room in your budget for breakfast cereal, but not expensive, name brand cereal.  The point is, the items in your "need" category may need to be analyzed further.  Do not blindly budget items as "needs" because they technically fit into a particular category.  Be honest about your finances and it will help you budget better.

"Wants" Should Not Be Automatically Excluded:

A big mistake that people make when preparing a budget is that they think they have to eliminate all "wants" from their budget.  I would agree that "wants" are the most expendable, but automatically excluding them is a mistake.  People need some sort of release from the stress of their daily lives.  Whether it is seeing a movie, buying a piece of chocolate, or occasionally going out to eat, you need to budget some entertainment into your life or the stress of it all will consume you.

Ask Yourself A Question:

If you truly cannot determine whether something is a "need" or a "want," ask yourself whether you could survive without it for the month and whether lack of the product will damage your health or job situation.  When I say survive, I mean physical survival, not "if I do not see this movie, I will just die."  If you could physically survive without having this product for an entire month and the lack of the product will not compromise your health or your job, the product is most likely a "want."  However, as stated above, if you can afford it, it should not automatically be excluded.  

Remember, break down each category and look at the particular products in each.  Be honest with yourself and your budget.  Do not automatically exclude "wants."  Finally, if you could physically survive and your health and job will not be hurt, the product or service is most likely a want.

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