When it comes to prioritizing things to spend on, your needs should always be on top. And when we say ‘needs’, we mean the things that you literally won’t be able to live or function without. On the other side of the fence, we have our ‘Wants’, or the things that you could do without, even though getting them could (possibly) make our lives better in one way or another.
That’s why many people believe that we should never budget for wants.
Why do people believe it?
It would be great if your income allows you to spend on both your needs and your wants with ease. However, most of us aren’t lucky-enough to be in that situation.
After allocating budget for your needs, the next step is to prioritize what you might need beyond today. That’s why, after putting together an emergency fund, you should put your money in investment products that can help you achieve your goals faster, by making your money work harder.
Of course, you need money for those things, and if you keep on spending money on wants, that would mean you’ll have less money to funnel for future-proofing or for investing purposes.
Risks of believing this myth
While they’re never really considered essentials or necessities, wants might not be as unimportant as they might look.
While following a budget that only includes needs and investments (or the things that are necessary before you invest) will always be the best way, you might be the sort of person who would feel a little too restrained by always that. Depending on your level of willpower, that might lead you to give up on following a budget.
In that case, occasionally assigning a little money for a small want won’t be bad if it helps you stay on track. You can use it as motivation for sticking to your budget for the other months. And more importantly, this also allows us to experience the fruits of our labor.
Of course, if you feel that you have enough discipline to completely go without the wants, that would be ideal. Only you can tell which approach is best, but just make sure that your needs are covered and you still have money to invest with.
Verdict: It depends.
Whether it’s building an emergency fund or making an investment, the discipline of strictly sticking to a budget that you set is what will take you to where you want to go. If taking an occasionally (and preferably inexpensive) feel-good break along the way will help you get there, then go ahead and do it without guilt.
What’s important is that you keep going, so you can reach your financial goal.