Do you struggle with your finances? Understanding the difference between needs and wants can be a crucial step toward achieving financial freedom.

In this guide, we’ll provide useful tips on how to identify your priorities and make the most of your resources to secure a more stable financial future.

Determine your want vs needs

One of the first step and most important is to identify your needs and want is to determine what items or expenses are essential for your daily life, versus those that are more of a luxury or convenience.

Essentials may include housing, food, and transportation while luxuries might be things like designer clothes or eating out at fancy restaurants.

Make a list of all your expenses and categorize them into essentials and luxuries to get a clear understanding of where you might be overspending.

The needs and want differ for every individual.

For instance, If you are someone who lives in a suburb, a car could be essential to commute back & forth to the workplace.

If you are someone who lives in metro cities, buying a car could be a luxury when connectivity shouldn’t be a problem.

This will help you make better financial decisions and prioritize your spending toward achieving financial freedom.

Click here: How I reduced my credit card debt by 80% in 5 months?

Track your Expenses

To identify your want vs needs, it’s important to start by tracking all of your expenses.

This means taking note of everything you spend money on, from bills and rent to coffee and snacks. You can use a budgeting app or simply keep a notebook to track your expenses every day.

Once you have a clear picture of where your money is going, you can start categorizing those expenses into needs vs. want.

This will help you make more informed decisions about how to allocate your resources toward achieving financial freedom.

Remember, it’s okay to treat yourself occasionally but staying focused on your priorities will help you stay on track and achieve your goals in the long run.

Create a Budget

Creating a budget is an essential step toward identifying your needs and want when it comes to achieving financial freedom.

Start by setting financial goals that align with your priorities, such as saving for emergencies or paying off debt. Then, allocate your expenses into categories like housing, transportation, food, entertainment, and savings.

Be sure to prioritize your needs over want and make adjustments wherever necessary to ensure you’re staying on track with your goals.

Remember that budgeting is an ongoing process and may require regular adjustments as circumstances change in your life.

Prioritize savings Goals

To achieve financial freedom, it’s essential to prioritize your savings goals.

This means budgeting for emergencies, retirement, and other long-term investments before allocating funds towards want such as entertainment or luxury items.

Saving for an emergency fund is crucial to avoid accumulating debt when unexpected expenses arise.

Retirement savings may seem far off, but starting early and contributing regularly can ensure a comfortable future. Making savings a priority part of your budget from the beginning can lead to faster progress toward achieving your financial goals.

It’s important to understand the difference between needs and want when prioritizing your savings goals.

Needs are essential for survival, such as food, shelter, and healthcare, while wants are non-essential items that add enjoyment to life, such as vacations or a new car.

Prioritizing needs before wants can help you avoid overspending and accumulating unnecessary debt.

Advice from Warren Buffett

“If you buy things you do not need, soon you will have to sell things you need.”

 

The Oracle of Omaha is doing a tremendous job by imparting his wisdom to the younger generations with simple words.

Buy things you do not need – can be categorized as wants.

If you keep accumulating things based on your wants, soon you will be selling things that matter to you.

In other words, warren insists we should practice delayed gratification. Things like credit card purchases can make you an impulse spender and this habit can put you years away from achieving financial freedom.

Start being mindful of your purchases that benefit you.

Examples of wants vs needs

I believe in practicing what you preach!

Here is my budget to get a clear picture.

This is my monthly spending where 90 percent of my income goes to satisfy needs and 10 percent towards our wants.

Note: 1 or 2 percent may deviate if you calculate.

If your larger percentage of income goes toward your needs like rent, savings, and child care, you can rest assured that you are doing well than the majority of the population.

I hope this post about needs and want helps you in some way. If yes, please let me know in the comment section.

Thanks for reading!