If you have ever sat down and taken any kind of “budgeting for beginners” class, or read any post about “budgeting when you have no idea what to do,” you have most likely encountered, at some point, the following advice.
“Split up your categories into wants and needs!”
It’s often accompanied by some guide of how to do this. You might have heard, for example, that you should spend 50% of your income on needs, 20% on wants, and 30% on savings, or something along those lines.
And, of course, there is some merit to this advice. At the very least, it helps you take stock of where your money is going, and you can determine whether or not you’re spending too much on wants. If you look at your budget for the very first time and go, oh that’s a lot of money on shoes, that gives you important insight into what battle you’re fighting. But I have a big problem with this 2-category division, especially for young people starting out in their careers.
Most people don’t talk about money with their friends. I get it. But living with other students, and deciding household and rent details with roommates, you get a fairly good idea of other people’s wallets. It’s awkward, but then it’s fine and everyone gets over it. And we’re all surrounded by expenses every day, from the food we eat to the clothes we wear. Even if money isn’t something you talk about, it’s something we’re all constantly aware of. So if you’re clutching your pearls at the fact that my friends know how much I make, calm down and get ready to hear this revelation I made.
The secret category: Perceived Needs
I was talking to a roommate about budgeting, and he mentioned how much he spends per month, and it was like four times what I spend in a month. This person made more money than me by a long shot, but was still having a hard time with his bottom line at the end of each month. When I first heard that, I had assumed that it was from hobbies, eating out, and buying nice clothes. But while he definitely did spend more on “wants” than I do, that actually wasn’t the category that screwed up his budget. It was the third category – Perceived Needs. Let me explain.
At the beginning of the month, I never weigh the pros and cons of paying my rent. It’s the first thing I put money towards. I never say, “oh, maybe I should skip rent this month and invest in new clothes.” I never say, “I spent a lot on rent last month… maybe I should hold off.” Why? Because it’s a need. I literally could not survive without it. Also in this category is electricity, insurance, food, and basic clothes expenses.
Then there are wants. For example, I bought some earrings this week. I knew I didn’t need them, but I had room in my budget and I really wanted them. This isn’t a recurring purchase – just because I could justify earrings this week, doesn’t mean I’ll automatically buy more next week. Why? Because they are a want. I only buy them when I want, and I make myself re-evaluate if I can afford them, every time I shop for them.
The idea of re-evaluating your wants every month seems obvious and condescending. This is incredibly basic. Yes! It is. But think about it critically for a second.
There is almost definitely something in your budget that you buy on an ongoing basis, without re-evaluating each time, but that you don’t really need. Those are your Perceived Needs. They are things that you’ve gotten into the habit of buying, and that you replace every time they run out (or pay for every month, like some subscriptions). They’re harder to stop buying than true “wants”, because you’ve likely convinced yourself they are needs. In some cases, you’ve arranged other aspects of your life around them.
Here are some examples of things that fall into this category for many people:
- Getting your nails done.
- Getting your hair dyed.
- Having a lot of different streaming services (you probably have one for entertainment, but do you really need Hulu and Crave and Netflix and Prime??)
- Magazine subscriptions.
- Home fragrance products, like candles.
- Higher-end hygiene products, like scented body wash and pricey skincare.
Adjusting Your Mindset
If you like these things, and they fit your budget, buy them! That isn’t the problem. The problem is when you start treating them like “needs” when they aren’t.
Let’s take the candles, for example. If you burn a candle, and you like it, and then it runs out, you have two options. Option one is to say, “that was a nice candle. Maybe next week I should buy another one.” And then, you check to make sure it fits your budget, you decide if it’s where you want to put your money this week, and you buy it. That is treating it as a “want”, which it is.
Door two is to go, “I burned the whole candle, so I am out of candles. I have to get more next week.” With this thinking, you never stop to think about whether or not you can afford that candle, or if you even want another candle. Candles will slowly creep into something you feel like you can’t live without, and soon enough, you’ll think about them the same way you think about groceries or the gas bill.
For some people, this mindset is very foreign. But working in retail, I met a very large number of people who treated this little non-necessities as a need that had to be replenished. They would say that they were out of candles, or running out of candles. Sometimes it would even be an inconvenience for them – I never have time to shop carefully for these. I’ll just grab whatever’s popular, I don’t care.
How do I stop wasting money on these?
Force yourself to think critically about every purchase before you make it. I like to make myself wait a week before I buy something. If I can’t live without waiting, because I would starve or something, then it’s a need. Treat it like a need. If I get to the end of the week and my quality of life hasn’t taken a serious decline, I can still buy the item, but I have to treat it as a want. This eliminates the absent-minded purchase of things you believe you need…but actually don’t.
Skeptical? Here are some things I’ve talked myself out of by realizing they were actually wants (and that I didn’t even really want them).
- a vacuum. I don’t have carpets (and I hate vacuuming. I’d much rather sweep).
- a hand mixer. I waited a week, and in that week, I never made or even thought about any recipes that need one.
- a food processor. See above.
- not me, but my parents did this and realized they didn’t need a microwave. Their house hasn’t had one in twenty years and we don’t miss it.
- a toaster. I waited a few weeks and found that the oven was just as convenient.
There are lots of other things… but you get the point.
But I like stuff! I’m not a minimalist.
Neither am I! But that’s part of what’s great about doing this and eliminating the Perceived Need category – all the Stuff you buy is stuff you actually really love. I spent the money I saved on the vacuum on things I actually wanted, that I wouldn’t have been able to afford otherwise. This isn’t about depriving yourself. It’s about maximizing the amount of money that you can actually enjoy!
Remember – while it’s not in your best interest to see these little luxuries as needs, it is in the best interest of the people selling them to you.
Hair products, beauty products, and personal care items often come with a ‘reminder’ to buy your next batch next month. The move of more and more companies towards a subscription model is another way to trap you in this cycle. Do you really need new underwear shipped every month? Is it really a need every month to get new dog toys? At what point do you stop critically evaluating these purchases and just let them settle into your routine?
This month, I challenge you to take a look at your budget and see if any wants have crept into your Perceived Needs. Think about if they’re things you actually want to spend that money on, and consider letting some of them go. Living with less and focusing on the experiences of using your ‘want’ items can help you realize you have a lot more than you think.
Monday in Green 
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