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Divide your monthly salary in half. That number is the amount you will set aside for necessities. Housing, utilities, health insurance, groceries, transportation, and prescriptions are all considered needs. Some debts are also considered necessities, such as credit card payments or car payments. If you miss payments, your credit score will be negatively affected. Other needs include child support and alimony. Missing payments for one will land you in hot water. Therefore, it is a necessity.

But it is not an exhaustive list. If you’re not sure what’s a need vs. a want, consider the impact if you remove it. Health insurance, for example, is a necessity because you’ll incur fines if you forgo coverage. Plus, it’s important for your health. For more complex situations, like whether your cell phone is a need or a want, think more. It may be a necessity, but having anything above a base model cell phone and a basic phone plan leans more towards a need.

“People don’t realize that many of their needs are really classified as wants (like cable and a morning latte), and they can quickly increase this ratio,” consumer and money saving expert Andrea Woroch told SmartAsset. He suggests starting with “an honest assessment of your expenses and looking for ways to improve and reduce.”

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