Hate Budgeting? Try Rethinking It.

How the ‘wants versus needs’ trope fails, and what to do instead.

Sarah Newcomb 17 November, 2022 | 4:48AM
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Sarah Newcomb

As the saying goes, “If you want to be good with money, you have to know the difference between a want and a need.” Now, let me say this … Hogwash!

It seems every financial educator is required to teach this concept, but I hate the wants versus needs trope. I find it disempowering and false, and I’m here to teach you a better way, backed by science.

Why the Wants Versus Needs Paradigm Fails

The wants versus needs paradigm means well. It’s intended to help people weigh their priorities and keep their spending in check, but here’s the problem: It treats anything other than basic survival needs as wants, and this conflicts with the natural process of human motivation.

Misunderstanding Maslow

Anyone who has studied modern psychology will be familiar with Abraham Maslow’s hierarchy of needs. The idea is that if someone had none of their needs met, they would first be concerned with immediate survival (food, air, and so on). Once those needs are at least partially met, their needs for safety and stability (shelter, security) will loom larger. Next, their emotional and social needs would take center stage, and after that their needs for esteem, and then self-actualization.

This is correct to an extent, but we can take the idea of a hierarchy too far. Maslow himself was careful to note in his writing that, “Anyone who is deficient in any of the needs could be said to be unwell.” The hierarchy structure describes the general order in which we may pursue meeting our needs, but it’s not a hierarchy of importance, only of urgency, and there are exceptions. Again, quoting Maslow, “Who am I to say that love is less important than vitamins?”

Budgets Are Not Diets

Looking at the needs versus wants paradigm through the lens of Maslow, we see survival needs as valid needs, but everything else is treated as a want. By treating our “higher-order” needs as wants, the classic financial management advice leads us to slash spending on things like entertainment, social connection, dating, education, and many other things because they are not necessary for survival. Can we survive without these? Of course! Do we want to live without love, purpose, respect, or meaning? Absolutely not!

We must remember that all the things on Maslow’s hierarchy are fundamental human needs, and we are instinctively driven to get all of our needs met regardless of income. When we belittle our emotional, intellectual, and spiritual needs as unnecessary, we turn money management into a plan for feeling deprived. No wonder so many people hate to budget!

When think in terms of wants and needs, we turn budgeting into a plan for feeling deprived.


A Better Way

Yes, the numbers must work, but your life must work, too. Otherwise, you’ll internally resist your budget, and we all know how that can play out. So, how can a person honor the entire hierarchy of human needs and still live within their means?

Needs Versus Strategies

After studying several theories of human motivation, I am convinced that we want things because we believe they will help us meet some deep need inside us. Even the frivolous items we buy on impulse are attempts to serve some fundamental need such as fun, relaxation, comfort, or ease. Our wants point to needs. If we pay attention, money management can become an exercise in feeling deeply fulfilled, not deprived.

Instead of learning the difference between a want and a need, try learning to differentiate between a need and a strategy for meeting that need. This simple change in wording contains a significant shift in mindset.

In the needs versus strategies framework, needs are universal and fundamental. They don’t change, and they don’t disappear if we ignore them. What are these needs? The basic categories are found on Maslow’s hierarchy:

  • Survival,
  • Security,
  • Love and belonging,
  • Esteem,
  • Meaning.


We could break these down further, but you get the point. Needs are fundamental and relevant to all people everywhere.

Strategies for meeting our needs vary from person to person, and this is where we can turn budgeting into a creative problem-solving exercise that leads to deep fulfillment both in the present moment and the future.

Thriving in the Present and Future

Some strategies for meeting needs are effective, and some are not. Some are efficient, and some are not. Some are affordable, and some are not. The trick is to find a strategy that is both affordable and fulfilling for you as an individual. If part of a couple sharing finances, the strategy must meet the needs of both people.

For example, everyone needs transportation. Ignoring the need doesn’t make it go away—it makes it more urgent. However, there are many ways to get around, and they all have different costs. You could walk, bike, ride a bus, take a train, hire a car, carpool, or drive yourself. If you drive yourself, you could use a car share, buy a cheap ride, or drive a luxury vehicle. Someone may say, “I need a car because I live in a rural area.” No. You need transportation. Owning a car is one strategy for meeting that need. Others do exist. You could carpool, rent a car, hire a friend to drive you, and so on. Maybe owning a car is the best strategy available to you, but it is likely not the only one.

It’s Not the Latte

How many times have we all heard how much we could save by skipping the afternoon trip to the coffee shop? Experts shout that you could save $1,500 a year, so you think great, I’ll make my coffee at home. After a few days of sipping coffee in the break room or the kitchen, you realize it’s not about the coffee at all. It’s the buzz of the cafe, the familiar faces, the break from the view of the same four walls. By making coffee yourself, you eliminated the expense, but you didn’t meet the true need.

Maybe the trip to the coffee shop meets your need for social connection in an otherwise isolated workday. Maybe it’s the fresh air and the walk that boosts your mood. In any case, you can probably devise a way to meet your real need without spending quite as much. After thinking it through, a friend of mine discovered that her coffee shop trips are meaningful to her because she is a small-business owner, and loves contributing to other small local businesses. She decided that inviting friends to meet her for tea could increase the total purchase amount (the collective order) while reducing her individual spending.

Do this exercise in a few areas of your own spending, and you can have a fulfilling life today as well as a fat savings account tomorrow.

Change the Strategy, but Meet the Need

My favourite example of this technique comes from a talk I gave on the topic to a room full of financial advisors. After explaining the method, I had them break into pairs and pick one problematic spending area in their lives and do their best to 1) identify the needs their current strategy is meeting (or attempting to meet), and 2) find a new strategy that will satisfy the needs and save them money.

After several minutes of deliberation, one advisor shared his thought process. He told the group that he and his wife argue about how much he spends on his boat every year. She would prefer to save more (to meet her need for security). I asked what needs the boat meets for him, and he beamed while talking about the wind in his hair and the sun on his face. It was clear that sailing was meeting self-actualization needs. To cut this expense from his budget would be a blow to his life satisfaction. Her needs for safety and security are also valid and important to her quality of life, hence the arguments.

How could they meet both people’s needs with fewer dollars? The strategy he came up with was to offer sailing lessons to some of the teens at his yacht club. This would offset the cost of his boat, allowing his wife to put that into savings. Not only would he still get his boat time, but he would also feel more connected to his community by sharing his knowledge and passion for sailing with a new generation of enthusiasts. The new strategy met more needs than the old one and put more money into their savings at the same time.

You will know you’ve found the right strategy when you are excited about putting it into action. If you aren’t excited about a strategy, keep brainstorming until you’re thrilled with your new plan.

Summing Up

Budgeting through the lens of wants and needs can lead us to belittle important parts of the human experience, leaving us feeling deprived. If we reframe the task as devising strategies to meet all of our fundamental needs within the bounds of our income, then money management becomes a creative problem-solving exercise that leads to deep fulfillment today and in the long run.


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About Author

Sarah Newcomb  Sarah Newcomb, Ph.D., is a behavioral economist for Morningstar.

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