The difference between wants and needs may seem simple, but not everyone can actually make the distinction.
On a basic level, of course you know the difference between wants and needs. Wants are things like an iPhone, a nice cup of coffee, or a trip to the Caribbean. Needs are things necessary for survival, like food, water, and shelter.
So, what does that have to do with your finances? Well, people tend to forget about the whole “wants vs. needs” thing when it comes to money. Needs are dull and boring compared to the shiny and exciting wants that jump out at you. It also doesn’t help that the media likes to tell us what we “need.”
It’s more tempting to spend money on new technology, travel, or the latest game than it is to spend money on utilities, groceries, and gas for your car. However, when we spend more on wants, our ability to afford the things we need suffers.
Needs are not always as they appear
These days, a lot of things are considered “needs” that aren’t necessary for survival. You may think you need your TV shows, a weekly manicure, or the latest fashion. In reality, these are all things you can continue without. It might be painful, but you could do it.
There’s no question that you wouldn’t be able to survive without water, and not having shelter or appropriate clothing for the weather may hurt your chances of survival.
There’s a stark difference between the two. Unfortunately, between the media and our circle of friends and family, the line can get blurred. We’re told we need certain things to keep up appearances, and we think we need to spend on certain experiences (like a fancy dinner out) to meet the expectations of others.
Get back to the basics
I encourage you to think critically about your own needs and wants. Forget needs for a second and focus just on the things you desire. Do you want these things because they will make you happy? Or do you want something because your friend has it and you’re jealous? Or maybe you want a particular item because you’re unhappy and looking to fill a void.
Whatever the reason, dig deep and tune out all the noise around you so you can focus on what you want out of life. You might find that you’re happy with less, or that you don’t need certain things that have become routine to buy.
For example, I don’t have cable. When I moved into my new apartment, I was thrilled I wasn’t forced to pay for a package I wouldn’t use. I never watch TV; it would have been a waste. Yet, I know many people who don’t watch TV and still have cable, simply because it’s something that comes “standard” with every living space.
Comb through your expenses individually and ask yourself what kind of value they’re adding to your life. This one simple question might be enough to give you perspective on what you should and shouldn’t be spending your money on.
Stop living paycheck to paycheck
A common cause of living paycheck to paycheck is spending more on wants than needs. If you’re having trouble making rent, paying utilities, filling your car up with gas, or are generally worried about your bank account staying negative, you need to reassess your financial priorities.
Spending on needs should always come first. You need to budget around that, as boring as it may seem. What’s not boring is eliminating financial stress and having the ability to enjoy your money once everything else falls into place.
What are your wants and needs?
The best way to use your money is in a way that makes you happy, not anyone else.
Drilling down into what your wants and needs are is the key to guilt-free, value-based spending. Stop considering the wants of others around you so you can get clear on what you want out of life.
Once you have that in place, and you’re accounting for your needs first, it’s just a matter of saving up for your wants!