The Real Difference Between Needs and Wants [How To Identify Them]

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Needs, wants… where’s the line? When it comes to your budget, knowing the difference is essential. If you look at a budget, you’ll see that all expenses can be categorized into wants or needs in one way or another.

Knowing how to differentiate between these two financial categories is crucial in setting the groundwork for financial stability and management in the long run. So, what are the differences between needs and wants? Luckily, we got you covered!

In this article, we will be going through essential details you need to know in order to differentiate between needs and wants. And these may differ from household to household. We’ll also go through examples of needs and wants, and where you can apply the concept of needs and wants in your daily life.

Let’s get right to it.

What are the true differences between needs and wants?

When creating your budget, you’re looking at two things: Needs and Wants. You’ll have to weigh your needs against your wants and make some important choices in order to maintain financial health. But how do you know what is truly a Need and what is truly a Want? Is there a simple way to differentiate the two?

To make it simple, Needs are the basic things you must have to survive. They are the bare minimums that we need to function. On the other hand, Wants are the things that generally make life more enjoyable. But again, that’s not necessarily always true. A more apt description would be things that are perceived or expected to make life more enjoyable. They are the extras that get us through our day. And yes, no matter how much you think you need them, they are extras.  

Needs should always come before Wants in your budget. If you have any money left over from your Needs, then you can start allocating money for your Wants.

How to categorize needs vs. wants

When it comes to what is considered a need or a want, it is essential to know that all things can be classified as either one or the other depending on your situation and circumstances. But there may be certain nuances to consider.

For instance, food is a necessity for everyone and is therefore considered a need for most people. However, there may be some people who cannot eat certain foods without getting sick or even dying (those with food allergies). In these cases, these foods would be considered a want because of the circumstances surrounding them.

Furthermore, what is the line to draw in terms of the amount of food you need to consume? For the majority of people, that would hover around 2000 calories per day. Are you purchasing near that amount of food? Or are you purchasing way more and either consuming or wasting it away by letting it expire or simply throwing it away?

Consider someone with an affinity for alcohol. They may believe it to be a necessity because they believe they cannot live without it. Perhaps they are truly dependent on it to function at a certain level in society. They may consider alcohol a need in their life, and in certain ways, it may actually be a need (it is actually possible to die from alcohol withdrawal), but this scenario is very circumstantial. To someone else who doesn’t drink alcohol, it’s a clear-cut case that this would be considered a want because they do not feel they need it to survive or function properly.

Again, these nuances will vary from household to household. But once you’re able to define these things, you can then make better and more informed decisions to build a solid budget.

Why is it important to differentiate between needs and wants?

It’s easy to get carried away with your spending habits when you don’t really know the difference between a need and a want. You can find yourself in debt or with no savings because you started to think of things you didn’t even care about as something that was important to have—even though they truly weren’t.

An example of needs vs. wants

For example, when you start to really observe what you’re eating and why, there are some things that end up falling into the wants category. Here are some examples of foods that would be considered a need versus foods that would be regarded as a want:

Food as a need

Food provides nutrients, vitamins, and minerals for your body and brain to function correctly. So when we say food is an essential Need, we mean food in general. We need food to provide your body with fuel and help you maintain good health.

Food as a want

When we talk about Wants in relation to food, we’re talking about food that you don’t need to eat, or expensive food. Eating out is a want, since it is much more expensive option than cooking at home. Eating a luxury meal is especially a want, they do not provide you with nutrients more than cheap food that you can cook at home. Snack and beverages are also wants, they don’t serve any purpose other than satisfy a craving.

Here are some budget categories to help you organize your needs and wants.

More examples of needs vs. wants

So, now that you know how to tell the difference between the two, or at least a sense of it (which is a great start), let’s get into some more nuanced examples that we can use to get an understanding of how they really differ.


  • Food (up to a certain number of calories)
  • Water
  • Rent or mortgage payments (shelter)
  • Clothing (for warmth)
  • Medical care
  • Car payments/gas/insurance (if you need it to get to work)


  • Food (past a certain number of calories)
  • Voss Water
  • A 4 bed, 4 bath house for a married couple with no kids
  • Designer clothes
  • Spa treatments
  • A Porsche 911 Carrera S

The list goes on and on, but you should already have a rough idea of what wants and needs are by now. Always prioritize needs over wants, regardless of the circumstances.  

Needs that AREN’T actually needs

As mentioned, the line between wants and needs may be challenging to draw, especially when you have yet to get the hang of distinguishing needs and wants. Here are some examples of “needs” that aren’t actually needs:

“Diet” Meals

While it’s true that we all need food, for most people (especially those in developed countries), a diet meal service is not essential. Suppose you want to lose weight and you feel like you can afford it.In that case, this kind of service can be an effective shortcut to your weight loss goals—but it’s also possible to achieve your weight loss goals without spending money on something like that.

Exercise Equipment

While there’s no question that working out is essential for your well-being, you don’t need any special equipment to do it. Just do sit-ups, push-ups, or jumping jacks in your living room for free! Or take a hike outdoors.

The Latest iPhone

Oooh, a controversial one. Sure, your phone may have crapped out on you. You’ve probably been updating the iOS as recommended and now your phone is too slow. (Planned obsolescence, anyone?) But you know what, you technically didn’t have to buy that iPhone in the first place knowing Apple does this with their phones. And just a disclaimer, I have an iPhone and love it. It is a want that I choose to indulge in, and most definitely a privilege.

Who should apply the concept of needs vs. wants?

Anyone and everyone who uses a budgeting method should be applying this whenever categorizing purchases. Even if you don’t budget, it is a good idea to figure out and understand what is a need and what is a want.

Where can I apply needs and wants?

Needs and wants make it easy to prioritize our month-to-month expenses and long-term financial goals. You can apply your knowledge of needs and wants in any of the following budgeting methods and more:

Almost every single budgeting method takes into account needs and wants in one form or another.

When should you apply needs vs. wants?

Furthermore, when you’re deciding when to buy something, mentally try and gauge where on the spectrum of needs vs. wants the item in question falls. As an exercise, this may help you to decide to not buy certain things that you may not need at a given time. Over time, this can save you significant amounts of money and potentially help propel you out of a living paycheck-to-paycheck status. And if you need further help, don’t hesitate to enlist the help of a fiduciary financial advisor.

In conclusion

We’ve all got needs that are ultimately unavoidable. But it is the wants that give our life meaning and purpose; they define who we are. That being said, it can be potentially complex and varies from household to household.

Hopefully, we’ve given you a good place to start, and if you’ve got further questions, don’t hesitate to contact us. We’re always happy to hear from our readers!

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