How to budget based on needs vs wants
23 October 2025
2 min read
While the 50/30/20 rule tells you how to allocate your income every month, it doesn’t tell you how to distinguish between ‘Needs’ and ‘Wants’. Here’s how you can think about it.
Start simple:
- Needs = Must-haves to live, learn, stay healthy, and cover what you legally have to pay. This includes rent/mortgage, nutritious food (not from fancy restaurants), bus/MRT fares, bills, taxes, insurance premiums, and school fees.
- Wants = Nice-to-haves, not urgent. This includes private hire rides, eggs benedict in a café, movies, subscriptions, and shopping.
Here’s a useful tool to help you decide if something is a ‘Need’ or a ‘Want’.
Rate each statement on a scale of 1 (No/Not Really) to 5 (Yes/Absolutely). Add up your total score to decide!
| No. | Statement | Score (1-5) |
|---|---|---|
| 1. | If I do not have this item, my health, safety, or ability to carry out my daily activities will be affected. | |
| 2. | I require this item for school, work, or essential responsibilities*. *Example: Giving your parents monthly allowance if they’re not earning much, paying your income taxes on time, and topping up your CPF (if you're self-employed) |
|
| 3. | There is no affordable or simpler alternative, and I cannot borrow it from someone else. | |
| 4. | I have thought about this purchase for more than 2 days. | |
| 5. | I will still value or use this item a month from now. | |
| Total Score: |
If you’d like to be more precise, you can further categorise your spending with the 50/30/20 rule.
| Total Score | Verdict |
|---|---|
| 20-25 |
Most likely a NEED — Go ahead and include it in your budget. |
| 13-19 |
Could go either way — Reflect more. Can you delay or downsize it? |
| 5-12 | Most likely a WANT — Think twice. Can you do without it for now? |
Once you can categorise everything into ‘Needs’ and ‘Wants’, allocate 50% to needs, 30% to wants, and 20% to savings (adjust as needed). Review and tweak this regularly: life changes, so should your budget too.
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