After identifying needs vs. wants in your personal budget, you might be wondering how to further separate a “want within a need”. You would want to do this to get an accurate understanding of your true wants and needs. For example, paying rent is a need. However, you decided to splurge to get a nicer place or live alone instead of with roommates. How should you account for this in your personal budget other than just adding rent as a need? One easy way is to create two separate entries: one depicting the need and another depicting the surplus.
Let’s say based on your income, you should be spending a maximum of $2,000 a month on rent. However, you decided to splurge on your place and are spending $2,500 a month. On your budget, you would have two entries that may look like this:
Item | Need / Want | Cost |
Rent | Need | $2,000 |
Rent - Extra | Want | $500 |
You can do this with other items in your personal budget, like your car. By refining your budget further this way, you get a much better view of what your total wants and needs. This in turn can help you find items that you can trim. Although rent and car payments can’t be changed quickly, like cutting a streaming service, it can give you months to plan ahead when the opportunity to do so arises. Or not. If you’re doing well and hitting your financial goals, let yourself enjoy your luxuries!