You want it but do you need it? What is the difference?

When  creating a monthly budget, one of the most important steps to ­­take is categorizing your spending by whether it is a "need" or a "want."

Needs are your basic living expenses, such as rent or mortgage, utilities, insurance, food, gas etc.;

Wants are things you choose to buy, but could live without, such as: entertainment, dining out, travel, electronics, subscriptions or memberships.

But it’s more complicated than that. Think about going to the grocery store. Food is a need, so anything you buy there is a need too, right? Nope. Soda, name-brand products, prime cuts of meat — all of these things can be done without.

Reducing “want” purchases is the best way to lower expenses without cutting the important stuff. The best way to tell the difference between wants and needs is to pause and reflect before making a purchase.

Begin by asking yourself this question: Do I really, actually, truly need this? Answering honestly will help  you think through what you need . To get closer to the truth, ask yourself these two follow-up questions:

  1. What would happen if I didn’t buy this?
  2. What would happen if I bought a less expensive version instead?

Remember that saving money and getting out of debt should also be considered needs because they are investments into your long-term financial and personal well-being.

Understanding the difference between wants and needs is a core component of financial literacy. It’s the basis for a healthy budget and offers an efficient, relatively painless way to reduce spending. Give it a try!

Use Blackhawk Bank’s Budgeting Tools:; or stop in at any of our locations and ask to see a Personal Banker to help you with budgeting and general financial planning.

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