We see that sparkly shiny thing everyone else has, and we want it – now! And in our consumer-driven culture, we’re subtly and sometimes not-so-subtly encouraged to gratify our every want and desire as they arise.
Even if you’re not living paycheck-to-paycheck, a critical part of reaching your long-term financial goals can involve analysing your spending habits, and cutting the fat.
Below are some tips for differentiating between your needs and your wants – and what to do about those tricky things that fall somewhere in the middle.
In the purest sense, human needs can be broken down to air, water, food, clothing and shelter.
In 2017, however, we can probably expand the “needs” column to include items such as transportation, electricity, and internet in the home. A simple way to identify your needs is to look at your monthly credit card or personal loan statement and ask:
“Would the quality of my life be fundamentally lower without this expense, or would I struggle to perform my job?”
If the answer is yes, this is probably something you really need.
Who doesn’t want that sparkly shiny thing that everyone else has!
A trick to identifying wants is that they are often substitutable.
As an example, your pay TV subscription could be replaced by regular TV, a book from the library, or an evening of meditation or conversation.
Your car wash service could be replaced by a mop and bucket at home, and an Italian cafeteria machine might do away with your $5 takeaway morning latte.
These things may not necessarily dictate your happiness and wellbeing as much as you might believe if push came to shove, and removing them brought you closer to your financial goals.
As consumers we are taught to view these wants as needs. But an honest assessment of some of these items might find you viewing them otherwise.
Things can get tricky!
Room for Compromise?
The funny thing with needs and wants is that sometimes they are actually somewhat specific to the person.
This grey area is where things can get tricky, and where it can help to give yourself some leeway. After you’ve worked out your universal needs around clothing, accommodation, and internet, the next step might be to determine your specific needs for personal happiness.
And then it may simply be a matter of limiting the damage to your budget around these personal needs.
In the end, life would be no fun without a few guilty pleasures – so long as they don’t jeopardise our long-term saving, investment, and financial goals.