When it comes to budgeting, it’s important to be able to differentiate between what you want and what you need…
Wants
Any expenses that aren’t essential to your basic day-to-day living are your ‘wants’. These are the things you desire to have, not what you need to have. Wants are completely different for everyone, but they might include things like:
- Eating out or takeaways
- Hobbies
- Sports memberships
- Streaming services
- Trips away
- Activities like nights out or cinema trips
- New clothing
- New devices
Needs
Your financial needs are your costs that are essential to your day-to-day life, that you wouldn’t be able to skip without jeopardising your wellbeing. This includes:
- Transportation to work
- Food
- Utilities
- Essential toiletries, such as toilet roll and body wash
- Rent or mortgage payments
- Insurance
- Credit card or loan payments
If you’re struggling to determine whether a cost is a want or a need, you should think about what consequences you would face by failing to pay it.
Budgeting for Wants and Needs
Part of making a budget is being able to differentiate between wants and needs, and to set money aside for these. Your needs should take priority, and it’s important to ensure that you put aside enough money to cover your essential costs before anything else as being below budget for these could have serious consequences. Any money left over after your essential costs can then go towards savings and paying for things you actually want.
Some people like to try the 50-30-20 budgeting rule, which organises your spending into wants, needs, and goals. With this budgeting style, you put 50% of your money towards needs, 30% towards wants, and 20% towards your savings. Budgeting is not a one-size-fits-all approach, so you might find that this doesn’t work for you, but it’s one idea of how you can organise your budget.
At Red Star Education, we’re big on budgeting, and have designed our very own budgeting mini-course to help you with your budgeting journey. This includes video content on how to make a budget, our own budget calculator, invisible spending, and how to understand your payslip.
We also have a number of blogs on the topic of budgeting if you’re interested in finding out more:
What is the ‘Loud Budgeting’ Social Media Trend?
Does Spending with Cash Help us Budget?