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Understanding your wants vs needs

Posted: 21 Jul 2014

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Wants vs needs

When it comes to money, the most of us would not like to admit that we don’t really know the difference between our needs and our wants. When we were children we were taught that getting an ice cream or a Barbie doll was a want and not a need – but so we grew older and the lines between our wants and needs became blurred.

wants-quote

When last have you stopped to ask yourself: “Would I survive without this?” This question could help you to assess your financial status and budget better. You’d be surprised how much cash you could save if you are willing to have an honest “chat” with yourself. Next time you need to make a purchase, follow this simple diagram: wants-vs-needs-graph

Defining Needs

If the answer is “No”, this item immediately falls into the “need” category. You can now make a list of wants and needs by using the above diagram. You should be reminded what your basics needs should be:
  • A roof over your head
  • Food to maintain a good health
  • Water and basic access to sanitary services
  • Access to transport
  • An income that will sustain your basic needs
  • Basic clothing to protect you and make you comfortable
Looking at your wants versus your needs is a crucial first step that you need to take in planning your finances. In fact, budgeting can help you meet your credit obligations. Your credit obligations fall under the “need” category and should be something that you pay on time every month.

Defining Wants

Here are a few items we consume on a regular basis which to some people, are considered luxuries:
  • Junk food/eating out
  • Going to the movies
  • Alcohol
  • Cool drinks and take-away coffee
  • Name brand clothing
Are these things on your “need” list, but you cannot really afford them? Once you have clearly defined your needs, eliminate all the wants immediately or add them to a list that you can revisit when your financial status is looking better.

How to make more money available to repay your debt:

Once you have properly established the differences between needs and wants, your budgeting will become easier to do. When you have saved those extra bucks that you usually spend on luxuries, you can focus on settling your debt faster. Cutting these luxuries until your financial status improves, frees up necessary income to be used for any debt you may have. This gives you the freedom to pay off your debt quicker and avoid paying extra interest on overdue accounts.

But what about living a little?

It is impossible to always ignore those wants, which is why you should reward yourself every now and again. Allow yourself to buy take-away coffee, but don’t buy it every week. Limit yourself to eating out once every two months, cut down on the booze and ask yourself: Do you really need that pair of shoes?

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