Every purchase asks one quiet question: do I need this, or do I want it? This is lesson 3 of Mondosol’s Make Money course, hosted by Amara, who once budgeted her friend Diego’s birthday party down to the last balloon.
Read it, watch it, or press play and listen. Then practise in the interactive lesson on the platform.
In this article
What counts as a need
A need is something you must have to live safely, stay healthy and keep earning:
- Housing and basic utilities (heat, water, electricity).
- Food and essential medicine.
- Basic clothing for the season (a winter coat in Norway is not optional).
- Transport to work or school.
What counts as a want
A want makes life nicer, but you could live without it: eating out, the newest phone, streaming services, designer trainers, concert tickets.
Wants are not bad. A good budget includes them on purpose. The problem starts when wants are paid for with money meant for needs, or with debt.
The grey zone
Many purchases hide a want inside a need. You need food; you want takeaway sushi. You need a phone for work; you want the top model.
Amara’s trick: split the price. The basic version is the need. Everything above it is the want, and it goes in the “fun” column of your budget.
Opportunity cost
Every time you spend, you give up the next-best thing you could have done with that money. Economists call this opportunity cost.
Example: 300 kroner a week on takeaway coffee and snacks adds up to about 15,600 kroner a year. What else could that money do for you?
Watch: needs, wants and choices
Video: “Financial Literacy: Needs and Wants” by Learn Bright, on YouTube.
Video: “FinLit 101: Needs vs Wants” by the Canadian Foundation for Economic Education, on YouTube.
Try it: the 48-hour pause
- When you want something that isn’t a need, don’t buy it straight away.
- Write it down with the price and wait 48 hours.
- If you still want it and it fits your budget, buy it without guilt.
Most impulse wants fade within two days. The ones that stay are usually worth it.
FAQ
What is the difference between a need and a want?
A need is essential for safety, health or earning a living. A want improves your life but isn’t essential.
Is a phone a need or a want?
Often both. A basic phone can be a need for work, banking and safety. Paying extra for the newest model is a want.
What is opportunity cost?
The value of the best alternative you give up when you choose to spend money or time on something.
Should I cut all my wants?
No. Plan for them. A budget with zero fun rarely lasts. Many beginners use a simple split such as 50/30/20 (needs, wants, savings) as a starting point.
Keep learning
- Practise it: open the interactive Make Money lessons in your learning journey.
- Previous lesson: Earning vs. Spending.
- Next lesson: The Power of Saving and compound interest.
This article is educational and is not financial advice. Amara and Diego are fictional characters from the Mondosol cast.
Leave a Reply