The Difference Between Wants and Needs
The secret to spending less than you earn just might come down to really knowing the difference between wants and needs. We take a hard look at this seemingly easy concept that keeps so many of us from bettering our financial situation.
So you want to become wealthy? While there is no single road to getting there, it’s a sure bet that one principle is in place for those who keep their wealth over a lifetime. Live beneath your means. Spend less than you make. Don’t spend more than you can afford. It doesn’t come any simpler than this.
If you want to create wealth, you have to learn to do this. It doesn’t matter if you make $10,000 a year or $1 million. If you don’t learn how to master the step of spending less than you earn, you’ll never create lasting wealth.
While the concept is simple, chances are you are not following it. In all likelihood, you are living paycheck to paycheck, treading water. No matter how hard you try, you never seem to get ahead. Even when the raises come, the money still disappears just as fast.
If this sounds like your situation, you probably have not mastered the difference between needs and wants.
Wants and needs are not the same
First, it’s important to realize that wants and needs are not the same. When you read that sentence, you probably said to yourself, “Of course, everyone knows that.” Again, while everyone may know this intellectually, it is a good bet that you aren’t completely honest with yourself when it comes to the things you purchase.
How many times have you heard (or for that matter said yourself) “I absolutely need (fill in the blank)” when in reality the meaning was “I really want (fill in the blank)?”
I can’t live without those shoes. I will die if I can’t have that ring. I simply have to have that car. The list can go on and on. Please don’t get me wrong. These are phrases that we all use. That is why it’s important to step back and remember that wants and needs are not the same.
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How truthful to yourself are you about your own wants and needs?
It’s important at this point to make clear that taking the time to critically look at your current lifestyle and what are the true needs versus those things that are convenient wants will go a long way in saving you money and enabling you to spend less than you make.
Let’s take an example of your TV. Is your TV a need or a want? Although I can hear the arguments already rationalizing why a TV is a necessary part of your life, the truth is that it is more than likely a want. In most cases, it is probably an affordable want (with the exception of the 80-inch, state-of-the-art flat screen television with the price tag of a small car that you decided that you had to have). The question is whether the digital cable TV, 6 premium channels, satellite dish, the on demand movies, the DVD player with movie selection, etc. are all also affordable wants?
Which do you consider wants and which are needs?
Here is a list. Take a few moments to jot down what is a need and what is a want.
- designer suit
- large apartment
- ice cream
- lottery tickets
- entertainment center
- club membership
- concert tickets
- trip to Hawaii
- daily espresso
- cell phone
- golf clubs
Your needs will differ from mine
Unfortunately, the answers to these questions are not completely black and white. What may be a want for one person may be a necessity for another person.
For example, let’s take a look at a computer. If you make your livelihood on the computer, then a computer is a necessity for you. If you only use a computer to play the latest online games, then it isn’t. Knowing this, we can still make some pretty good guesses as to what are wants and what are needs from the above list for most people.
Shoes (and clothing in general), water, bed, car, lunch, medicine and furnishings are good bets to be needs. Now that doesn’t mean that the latest model, 4 wheel drive sport utility vehicle with all the extras counts as a need for most people, but basic transportation to make a living does.
A large apartment, computer and cell phone may or may not qualify as a need depending on your particular circumstances while a designer suit, ice cream, lottery tickets, entertainment center, club membership, concert tickets, trip to Hawaii, necklace, daily espresso and golf clubs all probably fall into the want section.
If you can take the time to start being honest with yourself, you will find that a lot of the things that you assumed were an absolute necessity until now are in reality nothing more than wants. Once you distinguish between the two and look at these issues objectively, you have placed yourself in the position to live within your means by simply asking yourself whether or not an item or service you are about to purchase is a need or merely a want.
Reviewed December 2021
About the Author
Jeffrey Strain has published hundreds of money saving articles and is the co-owner of SavingAdvice.com, a website dedicated to saving you money.
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