How to Budget Part III – Budgeting for Needs

basic needs How to Budget Part III   Budgeting for Needs

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I’m sure you’ve heard all the rhetoric about the difference between wants and needs.  If you are like me, you may be ready to pummel kick the next person that tells you how much money you could save if you just gave up Starbucks.   But, have you ever stopped to really identify what your actual basic needs are?    To make sure I don’t allow myself to bias the answer, I turned to Wikipedia:

A traditional list of immediate “basic needs” is food (including water), shelter, and clothing.[1] Many modern lists emphasize the minimum level of consumption of ‘basic needs’ of not just foodwater, and shelter, but also sanitationeducation, and healthcare.

This matches my gut check pretty well; however, I will add that a car is a need.  There are a few large cities that have excellent public transportation (New York for example) where a car can actually be a liability.  But for the majority of us, a car is more than a convenience and becomes a need for purposes of this How to Budget series.  Yes, we could walk, ride a bike, or take the bus – but considering the suburban sprawl American culture has developed around and our need to be able to get to work and also be able to pick our children up if they get sick at school, or take them to a doctor in an emergency – I am going to add a car to the list of needs.

Therefore, barring the exceptions, we have 8 basic needs:

  1. Food
  2. Water
  3. Sanitation
  4. Clothing
  5. Education
  6. Healthcare
  7. Shelter/Housing
  8. Car/Transportation

To develop your basic budget, you need to start with the minimum expense to provide basic needs for yourself and your family.  It is so easy to be blinded by what you’re used to and assume that if you have a bill then it is a need. You may think you need 5000 channels on TV because you’ve always had them, that you need to go out with friends 3 times a week, or that you need a new car every 4 years.   But, that just isn’t true.

If you can start with the minimum to meet your basic needs, then I’m hoping it will be clearer what are luxuries so that you can choose where to spend your “extra” money rather than letting your bills dictate that for you.  Learning to break habits can be very difficult – so we are going to tear your budget down to the very beginning and build it back up again to help get some insight and a new way to look at expenses and your money.  If you have money left over after paying for your basic needs, then you can go back and add in entertainment, cable tv, a larger house etc.  You get to pick where to spend the rest.


The bare minimum required to feed your family nutritiously does not include fast food, going out to a restaurant, or ordering pizza.   Your starting point for food should be how much it would cost to feed your family if you ate every meal at home.  It would be very helpful to know how much you are currently spending on groceries.  But, if you don’t know then a guide is $30 per person per week.   This is what we average in our house by watching sales, stockpiling, and using coupons.  This $30 a week includes all toiletries – soap, shampoo, toilet paper – and also manages to feed 2 dogs and a cat.  It is achievable with conscientious spending.  I know people that spend even less than this; however, $30/week/person is fairly frugal and may mean some changes in your grocery shopping habits.


I am going to lump these two together because my water bill and my sanitary sewer bill come together.  Yes, you could probably reduce your water consumption slightly by reducing shower times, installing low flow toilets, or xeriscaping.  However, for building your initial bare bones budget, just use what your water and sanitary sewer bills currently average.  Also, add in your trash service.


Although you can save a lot of money on clothes by shopping end of year sales and going to thrift stores, I am not going to tell you to buy all of your clothes used.  There is a standard of care necessary for your work wardrobe that requires some basic items which vary depending on your job.   If you are an attorney, you likely need a minimum of 10 suits and shoes to go with them.  If you are a construction worker, you need steel toed boots, work jeans, bibs, gloves and safety goggles.

I can’t tell you what your clothing budget should be; however, I do recommend that you take an honest look at your clothing needs and see if you could reduce your spending.  A great experiment for showing you just how much extraneous items are in your closet is the 6 item – 31 day challenge. Beyond stopping yourself from buying items just because they are on sale or for shopping therapy, there are ways to buy the clothes you need for less.

Some ideas:

  • Consignment stores
  • Thrift stores
  • Garage sales
  • Ebay
  • Craigslist


Education is an investment in the future.  Regardless of your situation, it is not the place you want to skimp. Tally up how much you spend on education – school fees, school supplies, tuition – and because of the multiple benefits, I believe at least one sport or other extracurricular activity per season is a necessity.  Unless things are truly desperate, don’t try to reduce your spending in this area.


Healthcare is critical and another place not to skimp.  Whatever you are paying for health insurance and healthcare – plan on continuing to pay it.  You may also want to take a look at your savings for a medical event to determine if it is sufficient or too much.  Yes, it is possible to have too much.  You could also take a few minutes to shop around for less expensive coverage – try an insurance broker to get a wide selection of plans and prices.  It doesn’t cost anything to use one and they know the ins and outs much better than most individuals.  But other than checking to make sure you have the best coverage for your situation at the lowest price (good to revisit annually), this is a basic need that shouldn’t be reduced.

Shelter and Transportation

That leaves the two big expenses to be discussed.  But because these are such high dollar items and your cost is highly dependent on choices you make, I am dedicating a post to each of them to give them the coverage they each deserve and require.

So stay tuned for tomorrow’s post – How to Budget for Transportation.  It includes a detailed discussion about used car versus new that you don’t want to miss!

What do you think so far? Anything I missed or you disagree with?

**If you missed the first posts in this How to Budget Series – you can catch up here:

4 Responses to How to Budget Part III – Budgeting for Needs

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