Last time we learned the 50/30/20 rule - 50% for needs, 30% for wants, 20% for savings. But here's the tricky part: deciding what's truly a need versus a want.

This distinction isn't always obvious and can make or break your budget success.

Engagement Message

Can you think of an expense that might be hard to categorize?

A true need is something essential for basic living - shelter, food, transportation to work, minimum debt payments, and basic healthcare.

A want enhances your lifestyle but isn't required for survival or maintaining your income.

Engagement Message

Would eating out for lunch be a need or want?

Here's where it gets tricky: the gray area. Some expenses can be either needs or wants depending on your specific situation.

A car might be a need if you live in a rural area, but a want if you live in a city with good public transit.

Engagement Message

What's an example of a gray area expense in your life?

To help decide, ask yourself these questions: "What happens if I don't pay this?" and "Can I maintain my income and basic living without this?"

If the consequences are serious (job loss, homelessness, health risk), it's likely a need.

Engagement Message

How would you categorize your morning coffee using these questions?

Smart budgeters look for ways to reduce costs without impacting quality of life. This might mean switching phone plans, cooking at home more, or finding free entertainment.

The goal isn't to eliminate all wants - it's finding the sweet spot between enjoyment and financial health.

Engagement Message

What's one want expense you could potentially reduce?

Let's see this in action: Jake spends $200 monthly on dining out. He could reduce this to $100 by cooking more, then use that $100 for debt payments.

Same enjoyment, smarter allocation. He's not depriving himself completely.

Engagement Message

What would be a reasonable reduction goal for your biggest want category?

Type

Fill In The Blanks

Markdown With Blanks

Let's practice categorizing expenses based on different situations. Fill in whether each scenario represents a "need" or "want."

Scenario 1: Sarah buys a gym membership because her doctor recommended regular exercise for her health condition.
This is a [[blank:need]].

Scenario 2: Mike upgrades to premium streaming service to watch the latest shows.
This is a [[blank:want]].

Scenario 3: Lisa buys work clothes for her new job that requires business attire.
This is a [[blank:need]].

Suggested Answers

• need
• want
• need
• want

Type

Multiple Choice

Practice Question

Which strategy best helps you reduce want expenses without feeling deprived?

A. Cut all entertainment spending immediately
B. Gradually reduce spending and find cheaper alternatives
C. Only buy needs for the next six months
D. Ignore wants completely in your budget

Suggested Answers

• A
• B - Correct
• C
• D