AFL Investments' budgeting basics: distinguish between your wants and needs

Distinguishing between a need and a want is pretty simple until you find yourself in the middle of the frozen food aisle at the grocery store with Ben and Jerry calling your name personally.  

“I have to eat, right?” we might think to ourselves.  

When you find yourself in the department store looking at the latest designer blouse, you might think to yourself, “I need clothes on my back so I need this blouse!”  

One of most important keys to managing your household’s finances is the ability to properly distinguish between our needs (the things that we need in our lives in order to survive) and our wants (the things that are not absolutely necessary in order to survive).  Some great examples of needs are food, shelter or clothing and while many of us are aware of this, it can be difficult to admit that we have turned some of our needs into wants without even noticing.  

Like the familiar scenario above, it is essential that we have the proper vitamins, minerals and nutrients that make our bodies run — does this include the chocolate ice cream that was calling your name?

Of course not! This is a want or something we’d like to have. This is, of course, a very simple example but it seems that as we evolve, our personal definitions of wants and needs begin to blur.     

The Internet or a cellphone, some might say, are classified as needs but unless you work from home or similar, they really are wants. 

Paying extra for high-speed Internet to catch up on the latest Facebook news or download music is inarguably a want.  Every situation is different;  however, when creating your budget, it is important to realize that yielding wealth begins with taking care of your needs and cutting back on your wants. 

Wants are important. They make life more than drudgery. But you have to stick to the wants you can afford.  

In addition to being able to distinguish between wants and needs, we must be able to prioritize them in order of importance.

For example, while there is nothing wrong with having premium cable, it shouldn’t be to the detriment of your budget. 

If you’re finding that things are a bit tight every month, then you should make the decision to cut the cable before the groceries.

You can also cut spending within your needs. A great example would be to monitor your weekly grocery bill and really ask yourself which items are essential for good nutrition and which items should really be left on the shelf.  

Really bring things down to the essentials and you will find that there is room in your budget for additional savings or debt repayment. 

Review your budget and make sure that you know what needs and wants mean for your life.

Remember that needs may mean different things to different people. For example, if you work in the city-centre and live in a remote area, you may find that a basic car or transportation in general is a need, while a person with a child who lives and works in the city may not need transportation but couldn’t earn a living without some form of basic child care.  

The key here is being honest with yourself and your budget, living within your means and rewarding yourself along the way.  

Need help identifying and prioritizing your wants and needs? 

 Elyse Rayner is a Wealth Manager with AFL Investments and can be reached at (441) 294-5738.