Needs Or Wants - That is the Question

Everyone has needs that they need to survive. Some of those need include food, water and shelter.

However, many people also have wants that they want to have. These can be anything from a nice house to a fancy car or even a trip abroad.

Most people struggle with separating needs from wants when they build a budget. They often confuse wants with needs or simply overspend on things they really want but don't need.

Needs are the basic requirements for human survival, like food, water, shelter and health care products. Without these, a person will suffer physical or mental illness and might even die.

In contrast, wants are things that a person wishes to have, but are not necessary for their survival. Fancy restaurant meals, vacations, electronic devices, branded clothes, and new cars are examples of wants.

They are also not universal and will vary from one person to another. For example, a family with young children may list transportation as a need, while an elderly couple living in a city with reliable public transportation might see a second car as a want.

Needs should be prioritized over wants to ensure that you live within your means and can afford to save for emergencies or pay off debt. Wants, on the other hand, can improve your quality of life. It's important to understand the difference between the two before you build a budget, so you can keep your spending under control and achieve your financial goals.

The term basic needs refers to those goods and services that are essential for a person’s survival. Typically, these needs include food, safe water, housing, education and health care.

Needs can be physical or psychological, and can be classified according to Maslow’s hierarchy of needs. The hierarchy divides human needs into five categories: physiological, safety, love and belonging, esteem, and self-actualization .

Humans need oxygen, water, food and shelter to survive. If these needs are not met, humans can suffer severe illness and even death.

Wants are things that a person wishes to have but are not necessary for survival. For example, a person may wish to own a new car or an iPad.

A person’s wants are influenced by their culture, social status and economic status. A person from a richer culture may want a comfortable bed and a TV, while a poorer person might desire a computer.

Needs and wants can be hard to distinguish, but it is important to identify them so you can make wise decisions about your money. You can do this by creating a list of your current needs and wants, then prioritizing them by level of importance or urgency. This will help you decide which are more important and which you can afford to spend your money on.

When a person or business is making their budget, the first thing they tend to look at are discretionary expenses. These are things like vacations, restaurant meals and entertainment that an income-earner can buy at their own discretion.

However, when a company is struggling financially or is facing short-term cash flow issues, they are usually forced to make cuts in their expenses. Discretionary expenses are the first to go as they do not have a major impact on the operations of the business or the individual’s daily life.

For businesses, there are a few different types of non-essential expenses that might seem discretionary to others but are actually essential for the survival of the company. For example, rent payments might be a non-discretionary expense to an established supermarket but a remote-first SaaS company would consider these expenses a necessary component of their success.

Likewise, workplace enhancements are considered a discretionary expense to most companies but are essential in attracting talent. For example, team perks that allow employees to upgrade their home office or purchase equipment are a key way of securing top-notch staff.