Creating a list of needs and wants can help you set financial priorities. Needs are things that you must have to survive: food, shelter, basic clothing, healthcare, and transportation. Wants, on the other hand, are things that you would like to have but that aren’t necessary for survival.
Knowing the difference between the two, and being mindful of the distinction when making spending choices, go a long way toward achieving financial wellness. You’ll need to rank your needs as well as your wants to clearly define where your money should go first. This applies not only to your current expenses but also to your goals—which can, in turn, fall into the categories of wants and needs. Needless to say, saving for a tropical vacation falls into the wants column, while stashing cash for retirement is a definite need.