Mastering Personal Finances: A Guide to Needs vs. Wants

Understanding the distinction between needs and wants is crucial for effective personal finance. Breaking down the essentials is necessary to making practical insights that help you to make informed financial decisions.

needs vs wants

  1. Defining Needs vs. Wants
  2. Basics: Things You Really Need

    What you need are the important things for staying alive and feeling good. Let’s talk about these must-haves that help you make good money choices:

    • Air: The Breath of Life
    • Air is super important for us humans. It gives us the oxygen we need to breathe, which keeps us alive. Without it, our body cells wouldn’t work.

    • Water: Our Body’s Best Friend
    • Water helps our body in lots of ways, like helping with digestion and getting rid of bad stuff. Did you know our bodies are mostly made of water, about 60% of it?

    • Sleep: Powering Up with Rest
    • Sleep is like a superhero for our bodies. It gives us energy, helps our body fix itself, and even makes learning and remembering things easier. A good night’s sleep is a big deal for our well-being.

      For most people in Canada, these first three needs are supplied at little or no cost. If you own or rent a home, you are likely faced with a regular bill for water.

    • Recreation/Leisure: Fun Time for the Mind and Body
    • Fun activities are like a reset button for our mind and body. It can be hobbies, sports, travel, or just taking it easy. Even in prisons, they make sure people have time for fun and relaxation!

      With a little bit of though and planning, this can also be a low to no cost item on you budget, but don’t ignore it.

    • Light/Heat: Keeping Things Just Right
    • Light helps us do stuff when it’s dark, and heat keeps us warm when it’s cold. Both are like buddies, making sure we live comfortably. The sun can provide much of our light for free, but for most of us, heat is an expense we must be prepared for.

    • Internet Access: The Digital Connection
    • In our digital world, having internet access is like a basic need. It helps us talk to each other, find information, and understand the digital stuff. It’s essential for many people in our societies.

      Fortunately, in most cities, the libraries provide free access to computers and the internet. If you only need occasional access to the internet, this may be a way to save money.

    • Food: What Keeps You Going
    • grocery listFood is more than just eating. It’s about staying strong and feeling good. Buying groceries and getting the right things to eat is important for a healthy life.

      Getting good value for you food dollar is not about buying the most expensive foods, but rather the most nutritious. The least expensive meals my wife and I make are frequently the least expensive. Plan how to use your leftovers for even more savings.

    • Shelter: Your Safe Place
    • Shelter means having a safe and comfortable home. Paying for a house, utilities, and taking care of your place – these are all part of having a safe and happy home. It’s not just a building; it’s a place where you feel good.

      We tend to want a house that is as big, or bigger than our parents’ home. A McMansion is a definite want, not a need. A young couple might consider purchasing a modest one or two bedroom home with a rentable suit attached.

    • Clothing: More Than Just Clothes
    • Clothes are not just for covering up. They help you show who you are and be part of the community. When you plan your budget, remember that clothes are more than just a need.

      Your clothing should reflect your occupation. Leisure clothing, other than clothes that meet your minimum needs are a want. Example: A $300 track suit is really not necessary for your daily three mile run. However, if you are a fitness instructor in a high end gym, it may be mandatory.

      Clothes should be viewed as a necessity, not a keep up with the Jones item. Consider the life cost of clothing. An outfit that lasts for only a few months is a great choice for a toddler, but may be a poor choice for an adult’s work clothing.

    • Healthcare: Taking Care of Yourself
    • Healthcare is not just for emergencies. Going for check-ups, staying healthy, and having health insurance are important. In Canada, at the moment, our healthcare is under stress, but you can still look after you health. A smart man once told me, “You are in charge of your own health. Make wise decisions.”

      Don’t forget dental hygiene!

      Using some of your money for healthcare helps you stay well and be ready for anything unexpected.

      Simply put, these things are the foundation of your budget. They’re not just for survival; they help you live a good life. Understanding these basics helps you spend your money wisely and make sure you have what you need both now and in the future.

    Wants: The Desirables

    wantWants, on the other hand, are things that enhance your life but aren’t essential. This includes dining out, lavish entertainment, the latest smartphone or other electronics, costly memberships, expensive vacations, subscriptions, luxury items, jewellery, personal gym, large house, expensive vehicle, brand name clothing and accessories, gourmet foods, etc.

    Distinguishing wants from needs is the cornerstone of sensible living.

  3. Budgeting Basics
    • Allocate for Needs First

      When creating a budget, prioritize your needs. Ensure that your essentials are covered before allocating funds to wants. This sensible approach builds a strong financial foundation.

    • Sensible Spending
    • Be sensible in your spending. Ask yourself if a purchase aligns with your needs or if it’s a fleeting want. Embrace practicality to make sensible financial decisions.

  4. Recognizing Impulse vs. Necessity
    • Pause and Reflect

    Before making a purchase, pause and reflect. Is it a spontaneous desire, or is it genuinely necessary? This small habit can save you from unnecessary and wasteful expenses.

  5. Small Changes, Big Impact
  6. Implementing small changes, like cooking at home instead of dining out, can have a significant impact on your finances over time. It’s about making sustainable choices.


In conclusion, differentiating between needs and wants is a life changing skill in personal finance. By embracing sensible living, prioritizing needs, and making small, practical changes, you pave the way for financial stability and prosperity.

As always, I am not a qualified financial advisor. I just relate financial management to my own experience which may not resemble yours at all. Advice is frequently worth exactly what you paid for it. Most of mine came from expensive experiences.

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