Distinguishing Between Needs and Wants

I spent most of my life having an internal struggle every time I bought something (or even if someone else bought something for me).

Pair of shoes?

Yep.

High chair for baby?

Yep.

99 cent dish scrubber?

Yep.

Do I really need this? Should I really be spending money? Every. Single. Purchase. I fought myself on the way over to the check stand, a lot of times putting stuff back on my way out of the store.

And it was sheer torture.

It’s important to distinguish between needs and wants.

But it’s also very important to keep your sanity.

You can spend all day having a philosophical debate with yourself about if you really need that pair of socks.

Or you could just have a system in place that lets you make decisions once, and leave the rest to let your system sort out.

With this system, you don’t have to worry about all the little (or sometimes bigger!) purchases, you can spend on what matters without sacrificing your long term goals!

This system utilizes the 50/30/20 rule. If you don’t know what the 50/30/20 rule is, it’s basically a way to figure out how much you should be spending on things you need, things you want, and savings.

It helps take out a lot of the guesswork, and gives you more peace with your finances. When using the 50/30/20 rule, you spend 50% of your income on needs, 30% on wants, and 20% on savings.

But even then, it can be hard to know what the difference between a need and a want is.

There are a lot of grey areas with needs and wants, so there’s no hard and fast rule. While some people may say needs are limited to food, water, and shelter, there may be other things you need in a lot of cases like, a car to get to work, and a pair of shoes to walk around in.

Then you add things like health insurance, gas for your car, and a computer for school, and things start to get a little hazy.

It’s easy to justify a lot of things as needs. And I’m not a big fan of making things unnecessarily complicated, so I like to keep it simple when figuring out needs vs wants. And like I said earlier, it’s not worth your well being or using a ton of willpower every time you buy something trying to figure this stuff out.

So here’s how it works.

Grab a copy of this sheet. On it, you’ll find a list of things. On the far right, mark down how important the quality/expensiveness of the thing is. There are four categories: ritsy, nice, average, and okay. For example, I need a car to get to work but don’t care how fancy the car is. I want it to be reliable, but not expensive. Because of this I would mark “average”.

Here’s a more complicated example for the category “Home Mortgage/Rent & Living Expenses”: I work from home, however it is not essential for me to have a home office. Yeah, it would be nice, but it’s not a need. However, I would really like one. I also don’t have a washer/dryer, or a dishwasher but would love to have one. It’s pretty important to me to find these things in my next place but this means more in rent. Because of this I would mark “nice”.

This isn’t an exact science, so don’t get too stressed about it! Just mark it as you see fit.

Next in the ranking category (between the checkboxes and the description) rank the categories from most important to least important, 1 being the most important.

Putting it with a Spending Plan

Using this list can help you build a Spending Plan that helps manage your money in a very easy way. You can find which categories to put your money toward first (the most important on your list), and everything else will either fill in the gaps, or disappear because you won’t care about it anymore.

Once you have this Spending Plan set up, you will have money in certain categories that are free for you to spend. Instead of agonizing over each purchase, you have a certain amount set aside that you can easily see.

So now instead of trying to figure out if you should be buying those paper plates because dishes are piling up too high (that’s totally me: no shame), you can just buy it as long as you have money in your category. If you don’t have the money, you don’t buy it.

Simple as that.

This makes decisions a lot easier because you know no matter what you are going to have everything taken care of at the end of the month. But, you can still get things that are not “needs” but make your life easier, or happier.

No stress, more smiles! 🙂