Separating Needs from Wants Can Help Reduce Stress and Anxiety

woman contemplating separating needs from wantsThe task of financial separating needs from wants can be difficult; however it is extremely helpful, especially when it’s time to manage your budget. In some cases, it can be easy to identify the difference between a need and a want. However, there are certain expenses that aren’t as black and white. Discover an easy way to differentiate the two so you can find a healthy financial balance, and reduce your stress and anxiety of trying to make ends meet.

Separating Needs From Wants When Creating a Budget

The simplest way to identify the difference between needs and wants is to think of a need as something that supports your daily existence and a want as something that brings you happiness and fulfillment.

Thriving on basic needs (food, shelter, clothing, protection) alone is unrealistic though. When creating a budget, you need to consider expenses which support the primary needs, as well as those which you have to pay for to avoid bankruptcy, eviction, or any other related financial loss. These can be identified as your necessary monthly expenses.

Let’s get started!


Grab a piece of paper and write down the amounts you spend per month on the following typical primary necessary expenses. (NOTE: it helps to have a calculator or additional paper to add up individual entries):

  • Rent or Mortgage
  • Utilities (electric, gas, water, sewer, trash removal)
  • Groceries (food and household supplies)
  • Personal items (toiletries, dry cleaning, haircuts)
  • Transportation (auto loan, public transportation)
  • Clothing

Now list the secondary necessary expenses (which are related to the primary expenses):

  • Renters or home owners insurance
  • Home furnishings
  • Cell Phone
  • TV / Internet
  • Gas and auto insurance (if applicable)
  • Health Insurance (including extra costs for medications, therapy, etc.)
  • Pet expenses (having a pet is typically a “want” but feeding them and caring for them is a necessity!)

Other required expenses (if they apply):

  • Student Loans
  • Credit Card payments
  • Life Insurance
  • Other debts


Now list on a second page, list your wants, or things referred to as desired monthly expenses such as:

  • Dining out
  • Entertainment (movies, golfing, bowling, concerts, museums/touring, etc.)

NOTE: For those first 2 items, list the average cost of each activity and number of times per month or year that you like to do them, such as: movies for 2 = $60 x twice a month = $120 per month.

  • Pets and related expenses (food, veterinary care, supplies – see necessities list)
  • Gym/health memberships
  • Spa treatments (manicures, pedicures, etc.)
  • Travel / Vacation plans
  • Retirement Savings
  • Gifts (holidays, birthdays, Mother’s/Father’s Day, Valentine’s Day, etc.)

And lastly, add to one of your pages an Emergency Fund (for home repairs, car repairs, appliance or electronic repairs, etc). Some consider this a need and some consider it a want, but either way, you need to think about the impact having an emergency fund or not having one would have on your total budget and lifestyle.

Identifying a Surplus or Shortfall

After noting dollar amounts for needs and wants, add your necessary monthly expenses to your desired monthly expenses. Take that sum and subtract it from your after-tax income. Do you have a surplus or a shortfall?

If you have a surplus…congratulations! Keep up the good work. Don’t forget to check your credit yearly to ensure you in optimal financial health. Consider looking at ways to invest the extra money such as share certificates and IRAs.

If you fall short…don’t despair! There are many ways to find the financial balance you need. Look at ways to cut down on both sides. This is typically harder for necessary expenses, but can include researching a better deal on your insurance plans or shopping around for a more attractive phone / internet /cable package. You might also consider refinancing your mortgage or consolidating your loans.

Then look at your desired expenses sheet. Where can you cut back? Can you limit your movies at the theatre to once a month? Can you skip the manicures and do your own nails? Can you take the kids to local community fairs instead of the big amusement parks?

Having a budget in place can reduce stress and anxiety, and promote good financial health! Do you need a little assistance with managing your budget? Diamond can help! Use our series of Personal Finance Calculators to figure out ways to save money and reduce debt, or stop into any branch to discuss how Diamond can help you live a more financially balanced life.

The views, opinions, and ideas articulated in this blog are just that, and should not be construed as financial or legal advice. The writers of these blogs are educated on the topics they are writing about, but they are in no way licensed financial advisors or registered investment advisors. Diamond Credit Union is not responsible for any actions a person may take as a result of the information they read in one of our blogs.