How do 'wants' differ from 'needs' in financial terms?

In financial terms, distinguishing between 'wants' and 'needs' is crucial for effective budgeting and financial planning. Needs are items or services that are essential for survival and basic functioning, such as food, shelter, clothing, and healthcare. These are the necessities one requires to live a stable and healthy life.

Wants, on the other hand, are non-essential items that improve quality of life or provide enjoyment but are not critical for basic survival. This includes things like designer clothes, entertainment, dining out, or luxury cars. By understanding that needs are essential for living while wants are not necessary for basic survival, individuals can prioritize their spending and make informed financial decisions. This clarity helps in budgeting effectively and ensuring that one meets their fundamental requirements before allocating resources to non-essential desires.