BET Lesson 4 of 11 · 3 min read
Needs and wants
Knowing the difference helps you decide what to protect and what to trim when money is tight.
What counts as a need
Needs are the basics you must have: food, clothing and shelter. They also include what you need to earn a living, like reliable transportation to work, and what protects you and your money, like insurance and emergency savings.
What counts as a want
Wants are upgrades and other things that would be nice to have but aren’t necessary for living, earning an income or protecting what you have. Food is a need; eating out is usually a want. A phone may be a need for work; the newest model is a want.
The line is personal. A car might be a need for one person and a want for someone who lives next to a bus line. That’s fine: what matters is that you decide on purpose.
Needs first
Covering all your needs before you spend money on wants is a wise habit. Before a purchase, ask yourself a simple question: “Do I need this, or do I just really want it?” Wanting things is normal; budgeting for them on purpose is what keeps them from crowding out your needs.
Remember
- Needs: food, clothing, shelter, getting to work, insurance and emergency savings.
- Wants: upgrades and extras. The line differs from person to person.
- Cover needs first, then plan for wants on purpose.
Sort your categories
Look at the categories in your BET ledger and decide which ones are needs and which are wants. The budget builder will ask you this.
Sign in with Google to try itSources and further reading
- Budgeting for needs and wants (teacher guide) (Consumer Financial Protection Bureau)
- Spending Money Wisely (Iowa State University Extension)