One of the most important concepts in money management is understanding the difference between needs and wants. In order to successfully manage your household finances and your budget, you have to be able to ensure that the most important items in your life—your needs—are taken care of before you focus on your wants.

Unfortunately, our society has blurred the lines between needs and wants. Many items once considered luxuries have been elevated to the status of needs—even though they aren’t exactly necessary.

What are needs?

Needs are items that you require for survival, including food, clothing, and shelter. Additionally, you could also consider items required to make a living as needs. Reliable transportation to bring you to work can be considered a need, as can an Internet connection, particularly if you work from home. The education necessary to develop the tools to provide for your family can also be considered a need.

In order to determine if an item is a need, take a step back and consider the place it holds in your life. If it were taken away, would you be unable to provide for your family? Would the loss of a second car really be detrimental to your survival? Would getting rid of your smartphone (and the expense of the data plan) lead to an inability to put food on the table? When you are truly honest with yourself, the exercise of separating needs from wants can be illuminating and can help you set spending priorities to improve your money management skills.

What are wants?

Wants are items that can make life enjoyable but that aren’t necessary for survival. Many of us feel that televisions, multiple cars, and large houses are needs—indeed, it’s easy to confuse wants with needs. We sometimes assume that comfort and convenience indicates necessity.

However, in tight situations, it’s important to understand that sacrifice—giving up some comforts and conveniences for the sake of remaining a financially viable household—is sometimes called for.

Unfortunately, it can be easy to morph wants into needs. For example, you may be able to justify buying a larger house than you can comfortably afford by pointing out that you need shelter. However, when you closely examine your reasons for stretching your budget in order to afford a bigger house payment, you might discover that a smaller house will fulfill the requirement of survival just as well—and help you remain financially solvent.

The same is true of other items. Will a cheaper car get you to work just as well as an expensive car? Can you get the education you need on scholarship at a public university rather than racking up student debt at an Ivy League school? These are questions that you need to ask yourself before you spend money on perceived needs.

Often, the items we think of as needs and as fixtures of everyday life are actually wants. (Do you really need multiple televisions in your home?) Understanding this distinction allows you to make tough choices when a financial emergency arises. Being clear on the wants that can be cut from your spending plan makes the decision easier when your family faces financial difficulty.

Is it wrong to spend money on wants?

It’s not necessarily wrong to spend money on the things you want but may not need. In fact, the comfort and convenience of wants can add to your quality of life. However, spending on wants should come only after you have taken care of your needs. This means that sometimes we can’t buy everything we want or have the experiences we want. Sometimes it means we have to save up for a few months in order to truly afford our wants.

Once you understand the difference between true needs and wants, you will be more likely to make money decisions that lead your family to financial freedom.

Miranda Marquit is a freelance writer and professional blogger specializing in personal finance, family finance and business topics. She writes for several online and offline publications. Miranda is the co-author of Community 101: How to Grow an Online Community, and the writer behind