Jean Chatzky
Do one thing: If you haven’t tried living within a budget in a while, or ever, take the plunge. You can search online to determine which budgeting plan (or app) may work best for you.
Budgeting = More Control Over Spending
If you want to learn smarter strategies for making your hard-earned money work harder for you, it may be time to revisit the basics of budgeting. (And if the B word makes you nervous, don’t stop reading just yet!) Learning to live within a budget – or a spending plan – can be a solid step to a better financial life.
Why Budgeting Matters
Research suggests that people who maintain a budget (or use budgeting tools) report having higher financial confidence and lower stress compared with those who don’t live by a budget. Why? It’s likely because what gets measured gets managed.
Budgeting and Financial Comfort
A May 2025 study of more than 2,000 U.S. adults by PYMNTS found that among those who couldn’t make their earnings stretch until the next direct deposit, more than 50% who began using budgeting tools reported feeling more financially comfortable.
Building Your Personal Budget
And while it may seem simple on paper, one of the most challenging pieces of creating a budget you can live with long term can often be separating essential expenses – often called needs – from what would be considered lifestyle upgrades or wants.
- Real-Life Example. For example, you may think you “need” to eat out four days a week, but you could probably get by on eating at home or packing a lunch and limiting restaurant or takeout food purchases to once a week or so. (And your wallet would surely thank you.)
Breaking Down the Difference Between Needs and Wants
To help unpack the differences between needs and wants, several financial experts weighed in.
Lucas Wennersten, CFP and founder of 49th Parallel Wealth Management, says he grew up with a father who used the wants vs. needs strategy to manage his finances for much of his adult life.
Benefit of Frugality and Savings
“His frugal lifestyle and savings habits paid off for him,” Wennersten says. “He and my stepmother were never really high earners, but they saved and invested and focused on needs vs. wants, especially in low-income years. My dad was so frugal that all of his friends called him “Coupon Bob.” He would never eat anywhere he didn’t have a coupon for.”
What Are Needs?
Our most basic needs are things that you must have to live, including:
- Food
- Water
- Housing (rent or mortgage)
- Transportation (to work and school)
- Clothing
Our needs may also be things that you don’t necessarily need right now, Wennersten says, but are likely to cost you significantly more if you put them off, such as:
- Regular medical and dental check-ups
- Routine vehicle maintenance
- Termite and other pest control treatments for homeowners
- Protections such as health and life insurance
“Some items can be needed and wanted at the same time,” he says. “We need food, but we don’t need to eat out at nice restaurants or have snacks and desserts. We need clothes to wear, but we don’t necessarily need custom suits and expensive jewelry.”
What Are Wants?
When it comes to household budgeting, wants are everything else in our lives (that cost money) that don’t fall into the needs category. Think concert tickets, vacations, streaming services, the latest smartphone when you already have a working device, etc.
Can You Have Both?
Yes. The key to covering your needs and still making room for some non-essential wants that make life worth living is to create a budget that allows for more of both.
- Be Intentional. “It’s not about cutting everything, but being intentional about what gives you joy,” says Alvin Carlos, CFA, CFP, a financial planner and managing partner at District Capital Management in Washington, DC. “One strategy that really works is setting up a ‘guilt-free’ spending number each month for your wants.”
How to Budget for What You Need And Want
A basic household budget should include all of the needs mentioned previously, plus a category for savings. If you can cover all of those things with your monthly income and still have money left over, this is where you have wiggle room to budget for wants.
- Wiggle Room for Wants. “Let’s say you give yourself $300 a month,” says Carlos. “You can spend that however you want: a nice dinner out, a concert ticket, a new pair of shoes, whatever feels worth it that month. The key is that once that $300 is gone, it’s gone. You don’t feel bad about spending it, but you also don’t swipe past your limit just because it’s on a card.”
- Freedom and Boundaries. This approach can give people freedom and boundaries at the same time. “You’re still enjoying life,” Carlos explains, “but within limits that protect your bigger goals: saving for travel, retirement, or paying down debt.”
