Wants vs. Needs: The Key to Smarter Spending

Article written by Shelby Anderson, Certified Credit Union Financial Counselor at Adventure Credit Union.

Stay in control of your money and goals

Whether you’re snagging your favorite latte, upgrading your phone, or planning a weekend adventure, spending has become second nature. It can be super easy to whip out your card and spend money without a second thought. But there’s a big difference between spending on a whim and being smart about your purchases; that difference boils down to one simple concept: wants vs. needs.

Let’s break it down

Needs are the essentials. Think housing, food, utilities, transportation, and healthcare; stuff you need to survive and get through everyday life.  Wants are the fun extras that make life a little sweeter—like streaming services, designer outfits, food delivery services, or the latest gadgets.  If you find yourself regularly spending money on wants, it doesn’t mean you are horrible with your finances. Both needs and wants have their place; the trick is to figure out the difference and keeping them balanced.

Spending vs. Spending Wisely 

Your finances can be stressful. For example, after a weekend out on the town, looking at my bank account use to cause me so much anxiety, that I would typically avoid it.  But it’s important to remember that avoidance or living in the land of denial won’t help you achieve your financial goals.

Before making a purchase ask yourself:

·       “Do I really need this, or is it just a want right now?”

·       “Can I wait on this?”

·       “Will this help me reach my financial goals?”

You don’t have to cut out all your wants!  Spending wisely simply means managing your wants so they don’t overshadow your needs or get in the way of your future.

Tips for Spending Wisely

Avoid the “buy now, pay later” game: Let’s be honest, spending can be easy. We live in a world of influencers around every corner trying to get you to buy all kinds of products. There are also services like Affirm and Klarna that offer you the ability to buy now, pay later. While those services sound good in theory, they can put you into a worse position financially. The buy now, pay later option tricks your brain by framing those unnecessary wants as easy to manage expenses.  But remember, buy now, pay later isn’t free money, it’s your future money. Your future self deserves financial peace, not payment reminders.

Budget for Both: Don’t cut out your wants completely; just plan for them! A good budget should give you a little wiggle room for fun after you’ve handled your needs and savings. That’s right- savings should be a line item in your budget.  The old adage of “pay yourself first” is a classic for a reason.

The 24-Hour Rule: For those non-essential buys, wait a full day before making a purchase. Often, that immediate urge will wear off, and you’ll be glad you didn’t rush into it.

Shift Your Mindset: Ask yourself what matters more: this immediate want or some financial peace of mind later? Changing your perspective can really affect how you spend. Create a ‘Wants’ Fund.  Set aside some cash just for guilt-free splurges. This way, you can treat yourself while still being smart with your money.

Review Your Spending: Tracking your spending is always a good idea.  Especially, if you try to be responsible with your spending but never seem to get ahead. For every purchase you make, write it down, and then categorize it as a want or a need. I promise you, it will be eye opening to see exactly where your money goes.

Conclusion

Spending wisely isn’t about depriving yourself. It’s about being in control of your money, your choices, and your future. When you understand the difference between wants and needs, you give your dollars direction. So, the next time you’re about to make a purchase, pause and ask: Is this a want or a need and is it worth it right now? That small question could change your financial life.

Contact us online or visit one of our local Michigan branches to take control of your money.