Your budget can be a great tool to help you set yourself up for financial success. For your budget to work, you have to make sure that it is realistic and reflects your individual lifestyle. 

Many of us think of budgeting as a chore or a restriction. Making us feel that a budget is limiting us from spending money on the things we want to enjoy in life. 

However, when budgeting is done right, it can be a tool to help you save money, get out of debt, and allow you to spend on the things you want. 

Needs versus Wants

The first step in making space for both needs and wants in your budget is to understand what exactly is a need versus what is a want. 

This can help you see how you are spending your money today versus where you optimally want to spend. 

What exactly are your needs? 

Typically, needs are items that are essential to live. These are the items you have to spend on for your everyday life or work. 

Some items that fall under the need category are: 

• Food
• Rent or mortgage payments
• Utilities and cell phone
• Car payments and insurance 

These are, of course, only basic guidelines. Use this list as a starting point to figure out your own needs. 

Everyone will have a different list of needs depending on their lifestyle and circumstances.  

What exactly are your wants? 

Figuring out what you want is the fun part of your budget. Your wants are things in life that make your life convenient or bring you joy or comfort.  

These are the things you might not need to survive, but they make you happy in life.

Some items that fall under the need category are: 

• Eating out or takeout
• Streaming services
• Membership to gyms 
• Travel and Vacations

How to balance wants and needs in your budget 

Your budget does not have to be a limitation. It can be a tool to help you balance your wants and needs to build the financial future of your dreams.

Identify your needs and wants

The first step in making space for both wants and needs in your budget is to see where your money is going today. 

To start, take a look at your spending for the last three months and categorize them as needs or wants. This will give you an idea of how much you spend on the things you need versus what you want. 

Use a 50/30/20 budget.

A 50/30/20 budget is a popular budgeting technique where you aim to spend 50% of your income on needs, 30% on wants and 20% on savings and paying off debt. 

While these are not hard and fast rules, the guidelines can help you create a balance in your budget between the things you want and the things you need. 

When you look at your current spending, you will be able to see how closely you fit with these rules of thumb and adjust as needed. 

For example, if you find yourself spending more than 20% on paying off debt, it might be time to find solutions to control your debt, like debt consolidation, credit counselling or a consumer proposal. 

Prioritize your wants

Once you have a list of your wants and how much you can spend on them, it is time to prioritize them. 

Maybe a vacation is more important to you than having multiple streaming services. When you make a list of your wants, you can make sure you can spend money on what you enjoy. 

Don’t let your wants become needs. 

There is often overlap between your wants and needs. 

It can become easy to overspend on your needs because we convince ourselves that we need them to live or work.  

Here are some needs that can easily become wants:  

• Shelter – while your rent or mortgage is a necessity, try not to live beyond your means. 
• Food – of course, you need to eat, but eating out or getting takeout may not be a need but rather a want or convenience. 
• Shop around for deals on necessities like insurance or cell phone plans so that you don’t overspend on these items. 

Re-evaluate and make changes 

A budget only works when it fits your lifestyle. It is essential to re-evaluate your budget often to make sure it still works for you. Things change in life, and it is important that your budget changes along with it. 

Be mindful of your spending.

Your budget should allow you to spend money on the things you want. It is easy to go overboard and spend on your wants just because your budget allows you to do so. 

Think about your values, and spend money on the things you really want or those that really bring you joy.  

Everyone’s needs and wants are different.

The bottom line is that everyone has unique financial goals and circumstances. Your budget must reflect your wants, needs and lifestyle. 

If you are struggling with making your financial dreams a reality, and need help to create a plan to manage your debt, our debt experts at EmpireOne Credit are here to help. We offer credit counselling services to help you find the best way to deal with your debt and can help you repair your credit. Contact us for a free consultation.