Identifying needs vs. wants
To save money and live on a budget, it helps to really understand the difference between needs and wants. And you probably do understand that, say, food is a need and a latte is a want. But some mornings, after cramming all night for a test or working late, a latte is sure to feel like a need. Maybe coffee is a need but gourmet coffee drinks are a want. Maybe a cell phone is a need for personal safety but custom ringtones are almost assuredly a want. When creating a spending plan and trying to live with limited funds, it's helpful to really consider what is a need and what is a want.
What you define as needs and wants does not have to remain static. For example, having an MP3 player could generally be defined as a want. But if you find that your roommates or noise in the library is too distracting for you to study, you might need background music to block out the other sounds.
Use the Needs vs. Wants Worksheet to write down some of your needs and wants-and then look carefully at what you've written down. Are the needs really needs, or can they be moved to the wants category?
Now, review your list and think about what's really important to you and what has lasting value.
- Do you really need or want everything on your list? Put stars next to the items that are particularly important to you.
- Are some needs really wants? Cross off the least important wants.
- Decide if each item makes sense. If not, cross it off, or change it to something that is more reasonable.
Did this help you identify ways to save money and meet your goals?