How do I Budget for Needs and Wants?

Guest Contributor: Christina Pay
USU Extension Assistant Professor

​Needs vs wants.  Who hasn’t fought that budgeting battle?  Tough as the struggle may be, it is a fight that can be won.  The reasoning is pretty simple, right?  A need is something that is essential for you to be able to live and work.  Needs include housing, transportation and food.  Wants, on the other hand, are expenses that help you live life more comfortably. Wants include entertainment, travel, and toys.  It seems straightforward enough, but what about those gray areas where needs and wants overlap?  On occasion, our wants may seem so powerful that we can’t imagine living without them. Consider an item such as housing. Shelter is a need; however, it may become a want if you’re paying more for rent or a mortgage in order to live in a larger home or upscale area.  And clothing? That, too, is a need, but if you buy expensive brands or are buying clothing just because it’s on sale, it can quickly fall into the want category.  There are several strategies to help you win the needs vs wants battle.

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1. Follow a 50-30-20 budgeting rule.  This simple rule suggests that 50% of your income should go to your needs and 30% of your budget should go towards your wants. The remaining 20% is designated for savings or paying off debts.  This may take some practice and if you find yourself spending too much in any area consider readjusting your budget. Likewise, if you know that an extra expense is coming up because you are planning a trip out of town or something similar, adjust your budget to accommodate that want.
2. Determine what falls into the needs category and the wants category.  No one can do this for you, it is up to you to decide what works best for you and your budget.   
3. Split the gray areas.  When looking at the gray areas of overlap between needs and wants, consider splitting an expense.  Perhaps the average rent in your town is $1500 but you’re paying $2000 so you can live closer to your work.  You could put the first $1500 in the needs column and then add the remaining $500 as a want.  That way you can have your needs and your wants met.  Just make sure you don’t overspend in the wants column.  You can spoil yourself occasionally, but, doing so all the time could put you in a world of financial hurt.  

Identifying your needs and wants helps you understand just how much power and control you have over your own budget. Knowing this will help you win the battle every time. 

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