Financial Management Tip Day 6: The Blurry Line Between Needs vs. Wants

Financial Management Tip Day 6: Do you understand the difference between your needs and your wants?

We live in a world full of consumerism. We get into a mindset of want, want, want but we need to work towards shifting our priorities and thoughts. It takes time to make such shifts. And you will make mistakes- slip-ups from time to time. I think its important to look at small changes before going radical.

A need is something you have to have (essential)- you need it to live. There are really 5 categories of needs: a roof over your head, healthy food and water, basic medical and hygiene products,  reliable transportation, and basic clothing. Some people consider there means of making an income as being a need. Other people consider life and disability insurance as a means of providing for their family.

Everything else is a want. A want is something you would like to have (nice to have but not essential). You want brand-name clothing, you want designer shoes, a new car, a fancy house, the newest technology, etc. I want junk food or cable.

There is a blurry line between our needs and our wants- we need a reliable cell phone but do we need the latest technology in our cell phone? We need a reliable car but do we need a fancy car?

It definitely seems like these words are now the same in advertising. There is a popular tv ad right now that uses the words “I need that” when advertising a tablet and speakers. When did we become so greedy?

Am I suggesting getting rid of all your wants, no but I am suggesting you take a look at where the bulk of your money is going and making sure that your priority (you pay first) your needs and than you can add in an appropriate amount of wants based on what you can afford.

If you lost your job today, recognizing where your wants are and that there is room for cuts within your budget helps you realize what is truly necessary and important.

For example, a few months ago we took a pay cut so we started looking at our budget and what we could cut out- we lowered our cable, internet, and home phone bill (changed companies for a better rate and better service), lowered the package on both of our cell phones, lowered the amounts we were spending on our variable spending just to name a few changes. These are small changes in our lives- do we really notice these changes? No, we don’t really notice them.

However, did we take out all our wants? No, we still have netflix, we still get the newspaper daily, we have money in our entertainment jar but we spend our money much more wisely now than before.

Every thing concerning money is a choice- some choices are easier than others to make.

Do you know where you could cut back if you had to? What ways have you tried to cut back in the past?

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