by A.W. Berry

Created on: February 05, 2010

Identifying needs vs wants in your budget helps determine if budget items are essential or non-essential. Doing this allows the possibility of improving a budget for lower costs and greater savings. When distinguishing between needs and wants, determining if you can survive without significant to change to your life can be helpful.

On the other hand, adjustments to budgets based on identification of needs and wants can also affect quality of life and standard of living which are within the realm of needs, hence identification of needs can be a little more involved than basic survival.

Becoming adept at convincing oneself that wants are actually needs can cause budgets to suffer. You may need transportation but what kind of transportation do you need? You may require food to live, but does that mean eating at a restaurant is a need? Are potato chips an essential vegetable? What kind of entertainment is essential to meet a need for joy and how important a need is joy?

Needs are generally more important than wants, however, needs can be classified in different ways.  Maslow's hierarchy of needs include things like 'Self-Actualization' as the highest order of needs. Most people can live fairly comfortable lives without self-actualization, therefore, the type of needs and the method by which needs are identified can affect how a budget is defined in terms of needs and wants.

CLASSIFICATION AND IDENTIFICATION OF NEEDS AND WANTS:

Identifying needs vs wants in your budget involves a standard or criteria by which needs are distinguished from wants. For example, a new vehicle may be a want if a vehicle is already owned, but the type of vehicle one already owns may also be a want in the sense that not all car types are required to fulfill a need assuming a vehicle is needed. A system in which budget items are identified by needs priority can help identify which needs are more important than others and which needs are actually wants in disguise. The following dualities can be used to distinguish needs by type.

i) Needs identification by type:

• Physical needs vs Psychological needs
• Essential needs vs Non-essential needs
• Empowering needs vs Non-empowering needs

To identify needs vs wants in your budget also involves determining which needs are also wants. For example, some wants may be misidentified as psychological needs; psychological needs such as sense of self-worth may be influenced by certain wants that affect standard of living or status, however,

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