Identifying needs vs wants vs goals
In differentiating needs from wants, you can see things already become complicated because food can fall in the need and want category. Groceries are a need. Dinner at a Michelin-star restaurant is a want. Think of it this way: if you don’t need it to survive, or you don’t need this version of it to survive (i.e., sushi delivery versus groceries), it’s a want. Entertainment, beauty upkeep, travel, clothes that aren’t for work – those are all wants. Your financial goals are about saving. With that at 20 percent, if you were to make $5,000 a month for example, you’d be putting away $1,000 of that each month to meet the 20 percent rule. If you struggle to do that, you may need to further assess needs versus wants. For example, a car can be a need if you use it to get to work. But if you’re unable to save money by having a car, and you could get to work by taking the bus or a train for less, you may need to move the car to the want category and remove it.