My Philosophy on Needs vs. Wants vs. Savings

by mzumtaylor on January 13, 2012

in Budgeting,Personal Finance

When I set up our Monthly Budget, I am very specific about which items I put where. Some people might find it odd, for example, that our internet or cell phone is a “Need” or that Debt Repayment is a “Savings” goal.

Let me explain…


Needs are bills that you have to pay for or someone comes to beat down your door (or takes away your house, or shuts of your power). Rent or mortgage, utilities, student loan payments, auto loan payments, minimum credit card balance payments (when we had them :D), et cetera. This category also includes the things that you actually need to survive (groceries) that you might be able to scale back on, but couldn’t actually live without.

Cell phones go here because we don’t have a landline. If we were truly in a hardship situation, I would probably scale back drastically on how much we pay for our cell phones, but I would never get rid of them completely.

Internet goes here because it is something that both Ben and I have to have at home in order to do our jobs. It is also partially a want, because we use it to access things like Netflix and Hulu Plus, but our internet would be one of the last things to go if we experienced financial hardship.


Wants are things that you choose to pay for, but if push came to shove and you had to cut back, they could go. Our Netflix and Hulu Plus subscriptions go here (as would cable if we had it), as well as our “Fun Money” budget, the cost of my Pilates class, money spent on eating out and alcohol, and so on.


Savings are the long-term money goals. The obvious things that go in this category and goals like saving for our emergency fund, or travel, or Christmas presents. But the extra money that we plan to put toward our debt goes here, too. The way I think about it is this:
a) we’re saving on interest by paying off our debt early, and
b) if we come on financial hard times, paying extra toward our debt is something that we could stop doing (therefore it isn’t a Need).

Everyone will vary slightly on what exactly they put in the Needs, Wants, or Savings categories of their budget, but that’s how I think about our budget.

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shanendoah@the dog ate my wallet January 13, 2012 at 11:15 am

I always say- do what works for you. It doesn’t matter if I (or anyone else) would classify things the same way you do as long as your system works for you. We are like you- no land line, internet would be prioritzed over the second car, etc. But there are lots of people that don’t have those priorities. And it doesn’t matter.
Your budget is for you and you alone. If it’s working for you, that is all that matters.


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