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Who hasn’t been there, standing in a store or browsing online, torn between what we want and what we truly need?
We all have numerous such moments, juggling between our needs and wants.
We understand that to reach our goals, we need to save or invest money. However, the appeal of branded shoes, clothes, or iPhones can be difficult to resist. While it’s necessary to replace items that are worn out or not working properly, do we truly need shoes and clothes that cost $100 or $200 or a phone that costs $800 to $1200?
Is it a need or a want?
Honestly, I’ve been guilty of this before, too. In such a situation, I convinced myself it was a need. But I was wrong. It is a want.
How much could I have saved over those years if I had not gotten a new phone every two years or so or spent $200+ on a pair of sneakers every now and then?
Now, let’s get into it more deeply.
The Basics of Needs Vs Wants
Is it a need or just a want?
What is Needs
Needs are the must-haves for a basic functioning life.
Examples of Needs:
- Housing (rental or mortgage)
- Utilities (water, electricity)
- Healthcare
- Groceries
- Transportation
In short, needs are the building blocks of a stable, functional life. Recognizing and prioritizing them is the first step towards making informed decisions about finances and overall quality of life.
So, the next time you’re about to spend your money, take a moment to reflect: Is it essential for my well-being?
What is Wants
While needs are essentials, wants are the nice-to-haves.
While they are not needed for a functioning life, they do brighten our lives. Whether it’s a luxury item or just something to satisfy a temporary craving, they enrich our lives.
Examples of Wants:
- Catching the latest movie or concert
- Dining at a high-end restaurant
- A vacation home or upgrading to a bigger house
- Subscribing to that premium streaming service
- Buying branded clothes and shoes
- Upgrading to a luxury car
While it’s great to treat ourselves, it’s important we understand the opportunity cost for doing it. (more on this later)
Blurring the Lines of Needs and Wants
Life isn’t always as clear-cut as black and white, especially when it comes to distinguishing our needs from our wants.
Some things dance on the line between the two, adding a layer of complexity to our decision-making.
- Smartphones: While we need a phone, do we truly need the latest iPhone? The older iPhones or other brands will do just fine. (I’m still using the iPhone X.)
- Housing: Sure, we all need a home. But is a three-bedroom apartment in the city’s upscale area a must-have, or does a simple apartment in the suburbs serve us just as well?
- Cars: When it comes to car needs, do you need a Mercedes Benz, or is a Toyota sufficient?
- Clothing: Is chasing the latest fashion trends essential, or can we be content with more timeless, affordable clothes?
- Dining: Is frequenting high-end restaurants or local diners essential, or can a simple home-cooked meal be just as satisfying?
- Entertainment: Spending on streaming subscriptions, or can we find joy in free or more budget-friendly entertainment sources?
- Health and Fitness: Staying fit is vital. But is an expensive gym membership the only way, or can outdoor activities and home exercises be equally effective?
The heart of the matter lies in discernment.
The Consequences of Financial Missteps
What happens when we can’t tell what we need from what we want?
- Living Beyond Means: We often spend our money thoughtlessly, leading to overspending and snowballing credit card debts.
- Impact on Credit Score: High utilization rates on your credit cards can negatively impact your credit score, making future loans harder and more expensive to obtain.
- Opportunity Cost: Every unnecessary spending means less money for savings or investments. Over time, this can significantly add up, especially when compound interest is considered.
- Emotional Toll: The uncertainty about your future, combined with the pressure of mounting debts, can strain your mental well-being, relationships, and overall life quality.
- Missing Out on Goals: Overspending can make financial goals, like buying a home or retiring, more difficult to achieve.
To avoid the disastrous outcomes mentioned, you must be able to discern your needs from your wants and be mindful of your spending decisions.
The Battle of Needs Vs Wants
Discerning your needs and wants will make you more financially stable and enjoy a richer, more fulfilling life.
Every time you make a spending decision, take a moment to reflect: “Is this truly essential for me, or is it a fleeting desire? Is there a cheaper alternative?”
As you constantly question your spending decisions, you’ll instantly recognize what’s essential and what’s unnecessary in your life over time. You’ll begin to manage your money more efficiently and fill your life with things that truly add value.
So, embrace this newfound perspective and strive towards a brighter, more enriching future.
