When I was in my 20s, and I was teaching myself how to budget for the first time, I became stymied at the good old 'wants vs. needs' conundrum.
And it is a conundrum.
In theory, you should budget for your needs first, then budget for your wants, OR, if you're trying to hit a financial goal (and really going at it), just budget for needs (and exclude the wants).
Not fun, but you'll get to your goals faster.
I tried that, sure, but there were (at least) 3 huge issues
1) What happens when life gets in the way? Suppose you craft a budget in which you only have groceries (need) and no eating out (want). What happens when you've had an incredibly busy weekend with family and friends ahead of a breakneck week at work? With no time for grocery shopping or meal prep, you have to eat out for the remainder of the week? In other words, you're forced to succumb to purchasing wants to fulfill your needs.
2) Marketers make our wants needs. One thing I can say about Americans is that we're extremely good marketers. Our Marketing and Advertising Industrial Complex knows how to hit our pain points like nobody's business. (If you're not careful next time you're at Costco, you, too, will find that 9-gallon jar of ketchup is not just a want, it's a need). Marketers and advertisers are not bad people; it's just important to be aware of the environment, so you can stay focused.
3) One person's want is another person's need. This goes back to values. If your core value is connection with family or friends, you'll pay for that roundtrip ticket back home to Dallas for Mom's 73rd birthday, or spend exorbitant amounts of money dining out with friends around town. For other people who don't value connection as much, a bouquet of flowers sent to Mom or a weekend hike with friends will suffice.
So what happens when one of these three issues rears its ugly head?
You think "this is just too complicated."
You spiral down in mind-drama, admit defeat, and go back to unconscious spending.
You abandon your budget and the notion of budgeting.
Because you're human. And that's okay.
But here's the key: you shouldn't think in "needs versus wants" per se.
Instead, you should think of the Six to Survive.
What are the Six to Survive?
In any given moment, you need these six things to survive.
Food/water in your body
Clothing on your back
Shelter to live and sleep in
Transportation to get around in
Utilities to keep you comfortable and connected
Medication to keep you functioning and pain-free (including glasses and contacts)
Let's not call these 'needs'; instead, they are life's necessities.
They always need to be paid for.
Sure, an auto insurance or health insurance premium are also needs, but in the event of a crisis, (job loss + apartment burning down + boyfriend breaking up with you in the same week), you need to secure the Six before you worry about these bills. Your survival comes first.
In a non-crisis situation, the Six do not necessarily come first in a budget nor are they paid-for first (more to come in future posts); nevertheless, they always need to be covered in your budget.
The good news is that you can use subcategories within the Six to cover discretionary spending. In other words, the category of Food covers both Groceries (need) and Eating Out (want) and gives you the flexibility to do both. You get to decide what you want to purchase before marketers infiltrate your brain. You can also cover the basics while still live in accordance with your values.
In earlier budgets, I used Dave Ramsey's ‘Four Walls’ (food, clothing, shelter,
transportation and utilities) to guide me (especially in lean months). But sometimes I'd forget to allocate for medication (or fail to remember picking it up at CVS). Those days left me feeling cloudy and dazed. When I created this my Six, I wanted to highlight the importance of budgeting for medications because, for many, they're vital.
Perhaps these 'Six to Survive' seems super-basic, but you’d be amazed what people end up paying for when under extreme duress (and I say that without judgment). When our amygdalae spasm, we don't think clearly, so an itemized list (especially one starting with an alliteration) can help.
And, hey, if you need help in building your own budget with the Six, feel free to hit me up here.