Identify needs vs. wants to make thoughtful spending choices

One of the key skills for managing your money wisely is the ability to distinguish between needs and wants. Needs are what is required in order to survive: food, shelter, healthcare, transportation, a reasonable amount of clothing. Wants are non-essentials you would like, but aren’t required for survival. When creating a budget and developing long-term financial goals, it’s helpful to distinguish between what you actually need, and what you may be able to do without.

Sometimes, you may have to choose between different needs and wants, depending on your financial situation and circumstances. For example, you may have to decide whether to buy groceries or go out for dinner, or whether to pay for a gym membership or workout at home. In these cases, you need to prioritize your needs and wants based on their importance and urgency.

One way to identify your needs and wants is to ask yourself some questions before you buy something. 

• Do I really need this item or service, or do I just want it?
• Is this item or service worth the money and time I have to spend on it?
• How will this item or service improve my life?
• Do I have enough money to pay for this item or service without going into debt or compromising my other financial obligations?
• Is this item or service compatible with my long-term financial goals and plans?
• Is there a cheaper or free alternative to this item or service that can meet my needs or wants?

In the long run, budgeting for needs and wants comes down to your priorities. Good decisions now will help you achieve your financial goals down the road.