In order to prioritize your spending and increase your savings, it is essential to understand the difference between needs, wants, and desires.
Needs are necessary for survival. These are basic in nature. Examples of needs include food, water, housing, clothing, healthcare, etc.
Wants are not essential for survival, but enhance one’s lifestyle and comfort, such as, entertainment, dining out, vacations etc.
Desires are strong aspirations like buying a dream luxury car, latest electronic gadgets like high-end mobile phones, etc. To satisfy desires, one may be tempted to borrow money (see the article Think Before You Borrow Money).
If we spend too much money on our desires or wants without prioritizing, budgeting and therefore saving may become difficult. Therefore, one should prioritize the allocation of money first towards needs and then towards wants and lastly toward desires without losing focus on saving.
To know more, please watch the following video:
(i) Needs and Wants?