Protecting your Finances: Needs and Wants
In my practice, we address holistic health, which includes the mind, the body and the soul. Many people have reached out in response to my blog on emotional shopping and key questions to ask ourselves in the new year. One of the things, we work on with clients to improve their finances is differentiating between NEEDS and WANTS. Here are a few practical tips to help you distinguish between needs and wants.
1. Understand the Basics
Needs: These are essentials required for survival or well-being, such as food, water, shelter, healthcare, and basic clothing.
Wants: These are non-essential items or experiences that enhance comfort, pleasure, or status, like luxury items, dining out, or entertainment.
2. Ask Key Questions
Do I need this to survive or function effectively?
What will happen if I don’t have this?
Is this item replacing a necessity I already have?
3. Pause and Reflect
Use the "24-hour rule" for non-essential purchases: Wait a day before deciding to buy something.
Reflect on whether the desire is driven by emotions like stress or social pressure.
4. Prioritize Long-Term Goals
Ask: Does this align with my financial goals or values?
Avoid sacrificing needs or savings to fund short-term wants.
5. Set a Budget
Create separate categories for "needs" and "wants" in your budget.
Allocate funds to cover needs first, then determine how much you can spend on wants.
6. Use the “Pay Yourself First” Rule
Dedicate 5%- 20% of your income for saving and investment depending on your income and the remaining to your needs, expenses, wants, etc.
7. Consider Alternatives
Can you meet the need with a lower-cost option?
Is there a creative or free alternative to fulfilling the want?
By consistently evaluating your purchases and reflecting on these factors, you can build healthier spending habits while focusing on what truly matters.
References
Berkely Well-Being Institute (2025). Needs and Wants: Definition, Difference, & Examples - The Berkeley Well-Being Institute
MoneyDigest (2024). The 24-Hour Rule Is The Money-Saving Hack You Need
National Institute of Securities Markets. Understanding needs, wants, and desires - National Institute of Securities Markets (NISM)
Simply Psychology (2024). Maslow's Hierarchy of Needs
Zimmerman, B. J. (2000). Attaining self-regulation: A social cognitive perspective. In Handbook of self-regulation (pp. 13-39). Academic press.
