The Holistic Lens: A Fresh Perspective on Financial Needs and Wants

Part 1 of the 3-part series, The Ultimate Guide to Financial Needs and Wants.

When was the last time you took a close look at how you make your spending decisions? We often hear about distinguishing between needs and wants, but what if I told you that this age-old financial advice barely scratches the surface?

In our complex world—where we continue to learn more about how our financial, emotional, social, and other dimensions of well-being are intertwined—self-awareness about what we consider essential can elevate our quality of life.  Welcome to a holistic exploration of needs and wants – where your spending decisions become a pathway to a more fulfilled and balanced life.

Why Is It Important to Know the Difference Between Needs and Wants?

Distinguishing between needs and wants is key because it helps you prioritize your spending, make better financial decisions, and ultimately achieve your financial and life goals. Here’s why it matters:

Prioritizing Spending

By identifying needs—the items necessary for your survival and well-being—you ensure that your most important expenses are covered first.

Recognizing non-essential things as wants gives you clarity about their place on your financial ladder.  Of course, you can still buy items you truly want, but you understand that for your greater good, your needs are a higher priority.

Making buying decisions with this clarity helps you to have enough resources for your essentials, avoid excessive spending, and save for long-term goals.

Budgeting and Saving

Knowing the difference between needs and wants helps you create a realistic household financial plan. You can assign a portion of your income to cover your needs first, and then decide how much to spend on wants or save to reach your financial goals.

 Understanding your needs and wants also helps you avoid living beyond your means. If you treat wants as needs, you risk overspending, which can lead to debt and financial stress.

Managing Debt

Distinguishing between needs and wants is especially important when managing debt. If you’re struggling with debt, focusing on needs helps you earmark more resources toward paying off debt rather than accumulating more debt by satisfying wants.

Focusing on needs can lead to faster debt reduction and lower interest payments over time.

Achieving Financial Goals

By prioritizing needs and limiting wants in your spending, you can direct more money toward savings and investments, helping you achieve long-term financial goals like buying a home, retiring comfortably, or building an emergency fund.

This approach creates a solid financial foundation, enabling you to weather unexpected expenses without compromising your basic needs or spiraling into a crisis.

Spending Mindfully

Distinguishing needs from wants encourages mindful spending. You think critically about your purchases and whether they align with your values and financial goals.

This mindfulness helps reduce impulsive spending and fosters a more intentional approach to how you use your money.

Nurturing Long-term Well-being

By consistently meeting your needs and managing your wants, you create financial stability—reducing stress and improving overall well-being. Financial peace of mind is essential for maintaining a healthy work-life balance and good mental health.

For all the reasons we’ve covered, understanding the difference between needs and wants is foundational to effective personal finance management. It empowers you to make informed choices, avoid financial pitfalls, and build a secure and fulfilling financial future that supports overall well-being.

What Are the Conventional Definitions of Needs and Wants?

Traditionally, financial needs and wants are distinguished by their level of necessity in your life.

Needs

Financial needs are the essentials—things you must have to survive or maintain a basic standard of living. These typically include:

• Housing: Rent or mortgage payments, utilities, basic home maintenance
• Food: Groceries and essential nutrition
• Transportation: Necessary expenses to get to work or school, like gas, public transportation, or car maintenance
• Clothing: Basic attire necessary for daily life and work
• Healthcare: Health insurance, medication, and medical expenses
• Basic utilities: Electricity, water, and essential communication services like a phone or internet

Wants

Financial wants are the extras—things that make life more comfortable or enjoyable but aren’t essential for your basic survival or well-being. These might include:

• Entertainment: Movie and sports tickets, subscriptions to streaming services, trips to casinos
• Luxury items: Designer clothing, the latest gadgets, or high-end electronics
• Vacations: Leisure travel and associated costs
• Dining out: Eating at restaurants or ordering take-out instead of cooking at home
• Upgrades: Opting for premium services or goods when a basic version would suffice

In short, needs are your “must-haves,” and wants are your “nice-to-haves.” This distinction helps people prioritize their spending, especially when funds are limited, by ensuring they first cover their needs before allocating money to their wants.

Historical Roots

Though the distinction between financial needs and wants likely dates back to the earliest days of human trade and survival, we’ll look at two periods that were key to our modern understanding.

The first of these periods, during the 17th century, laid the groundwork for decision-making about money and human needs. Later, the 20th century brought a shift in thought to aligning financial decisions with the demands of individuals and families in an increasingly complex economy and consumer culture.

17th Century Foundations

The distinction between needs and wants can be traced back to classical economics. Adam Smith and David Ricardo, two early influential economists, explored the idea of human needs, focusing on what people require to survive—like food, shelter, and clothing. They examined these needs mainly through the lens of how societies function and how resources are distributed. For instance, they talked about the minimum amount of resources or income people need to live, often referring to it as “subsistence.”

But while their work was groundbreaking, they were more concerned with big-picture economics—how nations produce, distribute, and consume resources—rather than how individuals should manage their money based on their needs and wants.

20^th Century Developments

Abraham Maslow’s Hierarchy of Needs, introduced in 1943, further formalized the idea of financial needs and wants by categorizing human needs into different levels, from basic physical needs to self-actualization. While Maslow’s theory is more psychological than financial, it influenced how we think about essential versus non-essential needs.

In the context of personal finance, the needs versus wants framework gained popularity as financial literacy and budgeting became more common in the mid-20th century. It’s likely that the concept was popularized through financial education materials, books, and programs aimed at helping people manage their money more effectively.

Bridging the Past and Present

The concept of distinguishing between needs and wants in personal finance has deep roots in both economics and psychology, and its use in personal finance has evolved over the last century.

Financial advisors, educators, and self-help authors have been using the framework of needs versus wants to help people prioritize their spending and make more informed financial decisions for at least 60 years. It’s become a fundamental principle in budgeting and financial planning.

It’s my hope that views on financial needs and wants continue to evolve to take into account the many dimensions of the whole person, as well as individual and cultural differences.

What Is a Holistic Perspective on Needs and Wants?

A holistic perspective on financial needs and wants broadens the traditional view by considering not just the immediate or material aspects but also the long-term emotional, mental, social, spiritual, and occupational dimensions of financial decisions. It also recognizes that different individuals, families, societies, and cultures have unique views on what they need and value.

This approach recognizes that financial well-being isn’t just about survival or fulfilling basic needs; it’s about achieving a balanced, fulfilling life within given means.

Holistic Financial Needs

In a holistic view, financial needs extend beyond basic survival. They include elements that contribute to overall well-being:

Physical Health and Wellness: Investing in medical care (including dental, vision, and hearing), medically recommended treatments, quality food, and fitness can be seen as a need. Physical health is interconnected with every other area of life.

Emotional and Mental Health: Using money to build financial security like an emergency fund—while not strictly necessary—can reduce stress and anxiety. Adequate insurance coverage and retirement savings are other items that may not be considered a “need” but that contribute to peace of mind. Mental health services not covered in full (or at all) by insurance may also be vitally important at times.

Social Ties and Relationships: Allocating money to maintain social connections, such as family gatherings or community involvement, can also be viewed as essential to a well-rounded life with a reduced risk of the harmful effects of social isolation.

Personal Growth and Fulfillment: Education, skill development, and experiences that contribute to personal growth could be considered needs because they support occupational and general well-being.

Spiritual Fulfillment: Attending retreats or workshops takes money for transportation, fees, and lodging. So does helping a person or animal in distress or contributing to a cause. Acts such as these can fulfill a need for contribution, purpose, and meaning in life.

Occupational Well-being: Some people discover that having a 9-to-5 job is a miserable and unsustainable lifestyle that is making them ill. In their case, an aggressive saving plan for early retirement could be seen as a need. Other people may feel strongly called to a profession that requires many years of costly education, an expense that could be considered necessary for a fulfilling life.

Key Differences from the Traditional View

In a holistic approach, the line between needs and wants becomes more fluid. The focus shifts from merely surviving to thriving. The whole-person perspective asks questions like:

• Does this spending contribute to my long-term happiness and well-being?
• How does this expense affect my mental, emotional, and physical health?
• Will this purchase enhance my relationships, personal growth, or life satisfaction?
• How will this expense impact my overall financial picture, and how can I adjust my budget to afford it?

This perspective encourages a more thoughtful, intentional approach to spending, recognizing that true financial health encompasses more than just covering basic needs. It’s about creating a life that feels balanced, fulfilling, and aligned with your values.

How Does a Holistic View of Needs and Wants Impact Spending?

With additional categories considered as possible needs, it could seem that a holistic perspective would encourage more spending than a traditional view of needs and wants. It’s true that balancing spending holistically across multiple valued categories requires prioritization, planning and sometimes compromise, but here’s how you can handle it:

Rank Your Values: Start by ranking your valued categories in order of importance. While all might be important to you, some likely hold more weight in your overall well-being. For example, regular exercise might be more crucial to your life than vacations. Knowing what’s most important helps you allocate your funds accordingly.

Set Spending Limits by Category: Once you’ve ranked your values, assign a spending limit to each category based on its priority. For instance, you might decide to spend more on exercise and nutritious food because they’re daily essentials, while limiting spending on entertaining, which you do less often. This doesn’t mean eliminating spending in any category, just adjusting based on your current financial resources and goals.

Practice Creative Compromise:  Look for ways to enjoy what you need in your life without overspending. If you value massages but need to allocate money elsewhere, you might reduce the frequency of massages or look for discounts or packages.

Reflect on Long-term Value: When faced with spending decisions, consider the long-term value versus the short-term pleasure. For example, will cutting back to one massage a month allow you to reach your emergency fund goal faster? Sometimes reframing the decision in terms of long-term benefits can make a temporary sacrifice feel more worthwhile.

How Are Financial Needs Redefined through a Holistic Lens?

Holistic needs are the essential elements required not just for physical survival but for maintaining overall well-being—physically, mentally, emotionally, socially, spiritually, and occupationally.  These are the expenses that support your health, security, and fundamental quality of life.

Holistic needs include basics like housing, food, and health care but also extend to things that ensure mental peace, emotional stability, and personal growth. This might include costs for mental health support, education, or activities that sustain your long-term well-being.

How Are Financial Wants Reframed in the Context of Overall Well-being?

In a holistic sense, wants are expenses that enhance your life by providing joy, enrichment, and experiences beyond what is necessary for well-being. They aren’t essential for survival or basic health but contribute to your overall happiness and life satisfaction.

Holistic wants include things like vacations, hobbies, dining out, and entertainment. These expenditures may vary in importance based on individual circumstances, but they are more about improving your quality of life and fulfilling personal desires than meeting essential needs.

These whole-person definitions of needs and wants recognize that what constitutes a need or a want can differ from person to person, depending on individual values, circumstances, age, life goals, and culture. What feels essential to one person might not be the same for another.

What is the Interplay between Financial Needs and Wants in a Holistic Framework

In this context, the interplay is dynamic and interconnected, reflecting how these categories support overall well-being, rather than existing as rigid, separate entities.

Here’s how they interact:

As Points on a Continuum

Rather than viewing needs and wants as distinct, a holistic approach sees them as points on a continuum. Financial needs represent the essentials for survival and well-being, while wants provide enjoyment and entertainment.

But sometimes what starts as a want can become a need if it consistently contributes to your mental, emotional, or physical health. For instance, regular massages might begin as a want but evolve into a need if they become crucial for managing stress, reducing pain, or maintaining health.

As a Reflection of Personal Values

In a holistic view, needs and wants are closely tied to your personal values. Needs are the baseline requirements that align with your core values—such as health, security, and stability—while wants express desires that resonate with your deeper aspirations, like personal growth or joy. This interplay means that both categories are necessary for a balanced and fulfilling life, and the distinction between them can shift depending on your circumstances and values.

As a Balance between Immediate Satisfaction and Long-term Well-being

Holistically, managing needs and wants involves combining short- and long-term interests. Meeting your basic needs ensures you have a strong foundation to thrive, while fulfilling some of your wants adds richness and joy to life.

The key is finding a balance that allows you to meet essential needs without neglecting the desires that bring happiness, while still saving for future security. For example, you might cut back on dining out (a want) to save for a home (a long-term need) but still allow for occasional indulgences to maintain your happiness.

As Dual Forces Striving for Harmony

In a holistic context, fulfilling wants can either complement or undermine your ability to meet needs. When aligned with your values and well-being, spending on wants can improve your quality of life and support your overall needs. For instance, a gym membership might be a want, but if it helps you stay healthy, it supports your need for physical wellness. On the other hand, excessive spending on wants can compromise your ability to meet essential needs, such as paying your utility bills, leading to stress or instability.

As a Dance of Adaptability and Fluidity

Needs and wants are not static in a holistic framework. They adapt as your life circumstances, goals, and values evolve. What was once a want may become a need as your priorities shift, and vice versa. For example, in a period of high stress, activities that support mental health may shift from being seen as wants to becoming needs. Recognizing this fluidity allows you to adapt your financial decisions to best support your overall well-being.

As Mutual Reinforcement

In a holistic view, needs and wants can reinforce each other. When your needs are met, you have the security and stability to pursue wants that enrich your life. On the other hand, fulfilling certain wants can recharge you and give you the motivation or energy to meet your needs more effectively. For instance, a vacation (a want) might refresh you and improve your productivity at work, helping you secure your income (a need).

As a Way to Prioritize Spending Based on Well-being

A holistic approach involves prioritizing spending on needs and wants based on their impact on your well-being. This prioritization isn’t about strict budgeting but rather about consciously choosing what brings the most value to your life. For example, if spending on a hobby (a want) significantly boosts your mental health, it might be prioritized over other, less impactful wants.

As Integration for a Balanced Life

Ultimately, using a holistic perspective, needs and wants are integrated into a unified financial strategy that supports a balanced, fulfilling life. The goal isn’t to deny wants in favor of needs but to blend them in a way that aligns with your overall well-being and your financial resources. This means periodically reassessing and adjusting how you devote funds to both your needs and wants, ensuring that your financial decisions reflect your evolving values and life goals.

Crafting a Balanced Financial Life

Defining financial needs and wants holistically invites you to look beyond rigid categories and embrace a more nuanced understanding of what truly supports your well-being. By integrating self-awareness, personal values, and a flexible approach, you can create a financial strategy that not only meets your essential needs but also allows room for the desires that enrich your life.

Financial decisions aren’t just about survival—they’re about thriving. Balancing your needs and wants isn’t about sacrifice; it’s about making intentional choices that align with your values and long-term goals. As your life evolves, so too should your understanding of what you need and want, ensuring that your financial decisions continue to support the life you aspire to live.

In the end, a holistic approach to finances is about finding harmony. By recognizing the fluid interplay betweens needs and wants, you can build a financial life that feels both secure and fulfilling—one that truly reflects who you are and what you treasure most.

What’s Next: A Deeper Exploration with a Focus on Wants

We’re moving forward in our three-part series, “The Complete Guide to Financial Needs and Wants.” Get ready for Part 2, “The Roots of Wants: Unraveling the Complex Web of Desire.”

As the title suggests, it hones in on the origins of wants, those powerful drivers of your spending behavior. The post explores the combined forces of your individual experiences, culture, and psychological triggers, as well as social and consumer culture influences. I share a deeper understanding of what lies beneath the desire to buy, leading to personal insights that have practical, transformative power in your life.

Resources

I hope there’s a useful takeaway for everyone who reads this post, no matter your financial or life circumstances. Here are a few additional ideas and supports from other sources:

From the University of Denver comes this free PDF Needs vs. Wants Worksheet. It’s a simple and convenient system to help you think about the expenses in your life and the categories they fall under.

If you’re looking to challenge yourself and deepen your knowledge about needs and wants, here’s a chance to apply the information in this post to a real-world situation: a case study with discussion questions and sample responses.

Finally, please check out my free special report, 5 Things that Made Releasing My Spending Habit Take 5X as Long as It Should Have (no sign-up required).  It’s the story of how my spending behavior and lack of understanding about needs vs. wants led to a deep financial crisis in my life. It took me a while, but I came back stronger than ever—and I learned a lot.  In the report I share the five mental adjustments (including distinguishing needs and wants) that liberated me from my problematic spending pattern. My goal in telling my story is to demystify the process, spark a micro-shift in perception, and share some tips you can try right away.

Start or Join a Conversation

Thanks so much for your dedication to learning more about financial needs versus wants.

Many different perspectives are possible about this topic. Your thoughts are key to this community. Please share them here. If you don’t already have an opinion at the top of your mind, consider sharing your views on one of these points:

• How do you personally balance your financial needs and wants? What criteria do you use?
• Would you say you lean more towards a traditional or holistic approach to distinguishing needs from wants? How so?
• In your experience, how do your personal values shape the way you prioritize financial needs and wants? Have you noticed any changes in this balance over time?

Do you have a question that wasn’t addressed in this post? Comment below, and I’ll give you my best answer.

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Notice

This post is for educational purposes only and is not legal, financial, psychological, or any other type of professional advice. You should consult your own attorney, financial advisor, health provider, or counseling professional concerning any issues in these areas of expertise.

Please understand that facts and views change over time. Posts reflect the author’s understanding at the time of writing, as well as the perspectives of external sources for this post. While maintained for your information, archived posts may not reflect current conditions.

Photo Credits

1 Bruce Christianson

4 Conder Token D&h 14, Scotland Angusshire, Dundee. Public Domain, https://commons.wikimedia.org/w/index.php?curid=118394478

5 Wendy M. (author)

Photos are numbered from top to bottom. The photographers of the unnumbered images are unknown.