Hi all,

I'm just starting out getting my finances sorted and have started tracking all my expenses and setting a budget. I am starting to record whether each of my expenses are wants or needs so I can start balancing them out to more workable levels.

It seems like some things are obvious needs, electricity bills, groceries, rent. While other things are obvious wants, eating out, movie tickets, replica of the Millenium Falcon.

Some expense items however seem to fall somewhere in between, in a wants/needs grey area. Clothing for example. Yes I need clothing to maintain a respectable appearance at work, but I don't need a $200.00 pair of shoes. Transport - I need to get to work somehow, but do I really need to drive a monster truck?

A particular example that I am struggling with at the moment is my horse. Just like owning a dog or a cat, owning a horse is a long-term commitment and responsibility. I don't need to own a horse (she doesn't plow my fields, she's just my buddy), but I want to. So, when I pay for her food, does that make it a need - because she needs food, or does it make it a want, because if I didn't want a horse I wouldn't be feeding one right now?

Really interested to know what you all think? How do you make these decisions with your finances and does it matter that much?

Horses are very expensive to own & give little monetary return unless you're a professional cowboy or a rancher who needs them to earn a living. That's why the failure rate of breeders of race horses is so high.

Thanks for your reply Tightwad.

I'm not concerned with getting a monetary return from my horse. Just as I might not be concerned with not getting any kind of monetary return from watching a movie. It's a recreational expense. I'm just interested in whether I should class my horse related expenses as wants or needs.

You're welcome.

To me it's a want since it's not vital to my survival.

Yep, that's how I distinguish too - can I survive without it? So a minimum level of clothing is a need, anything extra is a want. Same for food and so on. I have my budget set up with normal expenses each month. But I also have a minimal budget that I would revert to if I lost my job. This is what I'm using to estimate my emergency fund. I'm starting with 6 months of this minimal budget.

Love the minimal reversion budget idea!

Fun drinking game: watch HGTV and take a swig every time someone says "need". warning: use water and take small swigs. even water can be fatal if you drink too much of it

I think generally speaking needs vs wants is such a grey area. Shelter is a need, but that could be met by a small studio apartment. Food is a need that could be met by rice and beans, etc. I am assuming you are not speaking of pure survival here.

Vacation, children, pets, the list goes on of what we may want out of life, but are not vital to our survival. Only you can decide what is "worth it" for your mental health and enjoyment of your own life.

Just noticed on the homepage an article than is applicable here "Ask the Readers: What is your hobby worth to you?"

Lots of my "needs" are really just wants, but nevertheless, here's how I look at it:

Needs:

1 bedroom house/apartment.
Electricity, water, gas
Fridge
Stove
Clothes of any condition
At least one mobile phone

Almost needs (or, really really wants):

2+ bedroom house/apartment
Car
2nd mobile phone
Place for kids to play (be it a yard or nearby park)
Washing machine
Decent clothes (no large holes in jeans, no non-patchable holes in shoes)
High-speed internet (at least 1.5mb/s)
Phone service (with internet above, can use Google Voice for free).
TV (long as it's color, it counts)
Computer

Wants:

Mobile phone plan with data (50MB or so a month would be plenty)
Nice clothes
Faster internet (6mb/s+)
Flatscreen tv, at least 42"
PVR
2 Laptops (one for me, one for wife)
Netbook/tablet/whatever for kids
Vacations/travel
Newer car with plenty of room (say, station wagon or minivan)
RV might be nice
Hobbies (yeah, a catch-all)

So, there is a bit of overlap. Flatscreen TV is a want, but a tv period is an almost-need. If I were doing a strict budget and wanted to buy a 42" tv (and assuming I was starting out with no tv), I'd take the cost of the want (let's say, $300) and subtract from it the cost of the almost-need (between free and $20 for a plain tv), and that's the cost of the almost-need (around $280-$300). Same with buying a car...if one could do the job for $1,000, but I want the $5,000 one...then $1,000 goes in the almost-need budget and $4,000 goes into the want.

Now, I don't actually keep a strict budget like that, but I do try to be conscious of the fact that not every want is a need (and vice versa). Most recent example I can think of, is I needed a new mobile phone. The one that'd do the job would have cost maybe half of what I ended up spending...so the other half counted as a want, and I deducted that from my misc. spending.

That's quite a good question.

In my opinion, a pet is something that can be a want or a need, depending on the situation. Some people feel pets are unnecessary, but for animal lovers (I'm assuming you are one), having a pet can be a "need". Companionship is a human need, after all.

So, the way you view your horse will determine the answer to your question. Since it obviously needs food to live, that is a need. It's things like treats or fancy accessories that can be then considered wants.

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I look at things in a lot simpler way...

Needs:
Food (Groceries, not eating out)
Shelter (A roof with a place to sleep)
Clothing (Not name-brand)
Transportation (something cheap $1-2k)

Wants:
Everything else.

Not long ago we would have put the horse in that category...and that's what we are really talking about - the horse.

I happen to be of the opinion that once you have an animal you have a moral/ethical obligation to care for it for the rest of it's life. At that point its needs become your needs.

I don't think you NEED a horse. But now that you have one, its needs are needs to you.

It so happens that horses are expensive and they can be sold so maybe there is a difference from a pet like a dog or cat.

I grew up in a rural area. I know that back then what some people sometimes did, especially when they went off to college or if they could not afford their horse, was that they "loaned" them to someone else on a semi long term basis. The person they loaned them to would have full use in exchange for feeding and caring for the horse. Usually it was for a fairly long period like a year or two. Actually, I know a woman now who is taking care of two horses right now in a similar arrangement so that kind of thing is still done.

I'm not sure if that is an option for you but it might be something to consider.

I was just about to say something similar. A pet is a want. Once you have it, its care and feeding is a need.

If you think it's a want but try to justify it as a need, it's a want.

If it's the cheapest option available to keep you or your children from dieing in the streets, it's a need.

If it helps you save money or make more money it's an investment. Keep in mind that not all investments are good ones. In this case, the actual value can and should be calculated so that you don't put yourself in the position of paying dollars to save pennies.

Ah, but it's not that simple....

What if Option A costs $3000 and will prevent you from dying for 30 years while option B costs $6000 and prevent you from dying for 60 years. Suppose there is an Option C that will only keep you alive for 1 week but costs only $1.

Is the cheapest option still the need while the other are wants? Does it make a difference whether you are 20, 40, or 80 years old?

What if Option A and Option B cost the same as above and both will keep you alive for 30 years but with Option A you will never see your family again while with Option B you will. Is the Option A still the need?

That's the problem with the whole want/need thing...everyone has their own definitions.