Needs vs. Wants: The Master Key to Taking Control of Your Money

Have you ever reached the end of the month wondering, "where did all my money go?" You're not alone. It's a frustrating feeling that makes us feel powerless over our own finances. But what if I told you the solution begins with a simple exercise in honesty?

Financial education isn't about complex math formulas or becoming a Wall Street expert. It's about understanding your own habits to make conscious decisions. And the first, most powerful step of all is learning to differentiate between what you need and what you want.

What is a "Need"?

Needs are those expenses that are absolutely essential for living. They are the pillars of your life, the non-negotiable expenses that allow you to maintain your day-to-day life safely and healthily.

• Rent or mortgage for your home.
• Utility bills: electricity, water, gas, internet.
• Groceries from the supermarket.
• Transportation to get to work.
• Medical expenses or health insurance.

These are the foundations of your budget. Without them, your stability would be compromised.

And what is a "Want"?

Wants, on the other hand, are everything that makes life more enjoyable and fun, but is not strictly essential for your survival. They are the small (or large) rewards you give yourself.

• That daily takeaway coffee.
• The limited-edition sneakers you just saw online.
• Dinners at restaurants or drinks with friends.
• The subscription to that streaming platform you barely use.
• The latest smartphone model.

The Power Isn't in Restricting, But in Deciding

Here's the magic: differentiating needs from wants doesn't mean you can never buy new sneakers or go out to dinner again. Not at all! It means you have the power to decide.

When you're aware that a €50 dinner is a want, you can ask yourself, "Do I really want to spend this money here, or would I rather put it towards that weekend getaway I've been craving?". You stop being a spectator of your finances and become the director.

Practical exercise: Take your bank statement from the last month. Next to each expense, write an "N" for Need or a "W" for Want. The result will surprise you and give you incredible clarity about your spending patterns.