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How to budget for needs and wants

Budgeting is one of the most important things you can do to prepare yourself for a successful financial future and to ensure you are making room for what is most essential to you. By budgeting for what you want and what you need, you're setting aside a certain amount of money for a particular purpose.

To understand exactly how to budget, you should answer two very important questions:

  • What do I need to budget for?
  • What do I want to budget for?

Your needs are your daily expenses and your short-term spending. Think groceries, gas, car payments, rent or mortage payments – the list goes on. These are the things you need to budget for, because if you don’t – well, you can find yourself in some serious financial trouble.

Then there are your wants. These are often the fun things – the things and experiences you desire and want to budget for. For example, going out for dinner, going to a concert, or taking off for the weekend with some friends or loved ones.

Another factor, which is everyone’s least favourite part – is the emergency fund. Setting aside some money for the things you hope never happen, but sometimes can happen, so it's never a bad idea.

By creating a budget that splits between your needs and wants, you’re giving yourself the opportunity to see all your expenses and evaluate what you actually need, versus what you really want.

What exactly are my needs?

Understanding your needs is a big step in getting your budget to a good place. This makes sense, as everything that falls under this category accounts for most of your budget.

The part that requires the most discipline, is separating your needs, that in truth, are actually wants. For example, your Netflix account has a bill that you need to pay. So, it’s a need… right?

Not so fast. If you only had $15 in your account and you had to choose between putting $15 worth of gas in your car (which you need for work) versus, $15 so you can binge on the latest series of Top Chef – you all of a sudden understand the difference.

Understanding these differences are crucial, especially when you have a tight budget.

Basically, if you can survive without certain things, they’re not needs – they’re wants.

Another thing to consider when you’re figuring out your budget, is the type of bank account you’ll need. If you’re regularly using your debit card, making Interac e-transfer® transactions and withdrawing cash, a TD Unlimited Chequing Account may be right for you as it offers unlimited transactions1. Alternatively, TD also offers other types of chequing accounts that can help suit different needs. If you're still undecided, our Discovery Tool can help you decide which account is best suited for you.

All that being said, your needs can – and most likely will – change. Your career, your living arrangements and other events can cause these shifts. So, reviewing your budget from time-to-time may be a good idea, allowing you to re-allocate your money into other buckets, like savings, for example.

What exactly are my wants?

Identifying your needs is the responsible thing to do and should be your biggest priority.

Now comes the fun part: budgeting for your financial wants.

Let’s not forget: your wants are very important too. Wants can help bring joy, comfort, and balance to your life. If you’re working hard, you need to be able to reap the rewards of all those long hours – within reason, of course.

Some of your wants may include:

  • Travelling (including road trips)
  • Subscribing to streaming services
  • Eating at restaurants

However, just like needs, your wants can change too. Depending on where you’re at in life – and where you’re going, you may be swapping your sports out with kids sports and adding the Disney channel into your streaming package before you know it.

This is why it’s a good idea to revisit your budget every once in a while, to ensure your money is being used properly.

How to budget for your needs and wants

Now that you’ve gone through your needs and wants, there may be some overlap.

For example, when renting an apartment – which is clearly a need, you may have to decide between a 600 and a 650 sq ft apartment. You may want the 650 sq ft one, but you only really need 600 sq ft. Or you want to buy something brand name versus off-brand. You may need a rain coat, but want the designer one – which could be a few hundred dollars extra. At the end of the day, it really comes down to what you can budget for.

This is why it's important to look at your needs and wants objectively and decide where each fit in and how it impacts your overall financial well-being.

A great piece of advice is to write out all your things and start putting them into their respective categories. When you start to track your spending, you may be surprised to learn that what you think is a need to have, is actually just a nice to have.

Some ways to find extra money in your budget from a needs perspective:

  • Shop for a better mobile plan
  • Shop for better insurance rates
  • Seek out sale items when shopping

The same goes from a wants perspective. Identify what your wants truly are and see if you can manage them more effectively. For example,
  • Eat out less often
  • Buy fewer clothes

The bottom line when budgeting for needs and wants

The bottom line is that you really need to look at your budget objectively. Be hard on your spending and be disciplined when it comes to truly defining your needs and wants.

The more honest you are with your spending, the harder your budget will work for you. If you start categorizing your needs that are actually wants - you’ll be spending a lot of your budget on “needs” before you know it.

The whole point of creating a budget is to stick it – so you can help reach your financial goals, while also allowing yourself some flexibility.

If you’re looking for a simple budgeting tip, tracking your spending on an Excel Spreadsheet is a great way to keep yourself accountable on a monthly basis.

You can also try TD MySpend, a helpful tool to track spending habits and to ensure your needs and wants are within your tracked budget.

1 For more information about transactions and a complete list of account fees, click here for Account and Other Related Service Fees. For information on our general services, please view our General List of Services.



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