Needs and Wants: Finding Our Compass Again

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Audio Needs and Wants

No one knows what day of the week it is.  Having holidays land on two consecutive Wednesdays and then stretching “days off” to one weekend or another (or both) has managed to muddle weekends and weekdays.

But we do know it’s after the first of the year, because:

  • Some have made resolutions that they’ll try to keep longer than two or three weeks.
  • Others are dreading the arrival of their credit card statements … to the point that they even refuse to go online to see what the year-end damage was.
  • Even others are grateful they made it through last year, but are not looking forward to the gymnastics they’ll still need to close out each month.

Despite public bursts enthusiasm, many are at least in a fog, if not in a funk.

No matter what our financial situation, one thing is for sure:  it wouldn’t hurt to have a little better control over our money, especially our expenditures.

On the surface that seems pretty simple.  We earn money.  If we budget, we then spend money on the things we need and there should be enough to cover them.  (Maybe even something left over.)  Yet somehow, often there is not.

Here’s the rub:  except for those on a painfully tight budget, most of us no longer know the difference between a “need” and a “want.”

The History of Needs and Wants

When did we lose track of the difference between needs and wants?

A chart found on the internet (but which I couldn’t verify) says that:

“At the beginning of this century [the 1900s], the average American had 72 wants and considered 18 of them important.  By the end of the century, the average American had 496 wants and considered 96 of them as genuine necessities for happiness.”  (Miller)

If that’s true, no wonder we’re overwhelmed by our wants!

How We Define Needs and Wants

As a review, needs are the essentials, the basics of life you require for survival:  a roof over your head, food, water and clothing.  Needs also include any formal financial obligations, that is, things you “need” to pay because of contracts (mortgage or rent, insurances, credit card minimums, car payments, etc., although with time some of these could be reduced).  Last are other necessities like gas, medical costs and any expenses that allow you to earn your income.

Virtually everything else we spend our money on is a want.  These are all the things we’d like to have, but could live without.

No one is saying that you should deny yourself everything that isn’t a need.  The purpose of this exercise is simply to point out that everything else you pay for is discretionary.  As a result, you have far more power and control over your money than you think.

Let’s make this more obvious.

The National Endowment for Financial Education (NEFE), on its website called Smart About Money, offers a helpful form called Wants versus Needs.

Print it out.  If you don’t want to do the exercise meticulously, at least sit for a few minutes and list all the things you think of as “needs” and then those you’d qualify as “wants.”

Why Acknowledging Needs and Wants is Important

If you’re doing well and have few financial constraints, it probably doesn’t matter what you put in what column.  And if you’re on a very tight budget, you’re probably very aware of what is what, having very little money available for many wants at all.

But if you’re somewhere in between, and concerned about how you’re going to save enough for you kids’ schooling or your own retirement, you might want to take a closer look at your priorities.

Spending on wants opens the spigot and becomes the greatest source of “leakers” in our budgets.

The nice people at NEFE offer another helpful form, called Plug Spending Leaks Worksheet.  Their suggestions are just a beginning; you can undoubtedly think of many more.  (Remember, by the year 2000, the average American already had 496 wants …)

What you do with this new-found information (and power) is up to you.  But you might want to do something real self-serving like deciding that for every two dollars you spend on wants, you’ll spend one dollar on drawing down non-mortgage debt or adding to savings.

The only winner in this case … would be you.

Let us know in the Comments section below if you realized how much of what you spend is actually up to you.

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Bio: Sharon O’Day fixes financial lives. She is a tell-it-like-it-is money expert with a successful career in global finance, plus an MBA from the Wharton School. Today she specializes in getting entrepreneurial women over 50 back on their game so they can have more money, less stress and more joy. With her “Over Fifty and Financially Free” strategies, they take actions that lead to their ultimate goal: financial peace of mind.

  • Dominique Letellier

    Merci Sharon. C’est simple, facile à mettre en place et tellement évident. Juste il fallait y penser et pour cela tu es impressionnante. Continue à nous donner de bonnes idées…..

  • Kung Phoo

    i was just talking to my wife about how the holidays put us in a little hole financially.. we will dig out of it.

  • Susan Schiller

    Identifying needs vs wants, for me, was eye opening. I first learned about this from Dani Johnson several years ago when I went through her “War on Debt” course. I was surprised she suggested that a cell phone was a luxury! She really challenged me, even down to eating up every last wilted veggie in the fridge before buying more groceries. Stopping the leaks is so very important, and even though it’s been years since I went through her course, I still need to be reminded of these truths. I still get needs vs wants mixed up sometimes. Sharon, this is such an important topic and a valuable life lesson. I’m going to share your post!

  • Alexandra McAllister

    Such an inspiring post, Sharon. I learned this the hard way when I lost everything and had to start over from scratch! It’s so true. There are things we need and things we want. I never looked at it this way, until I had no choice. I know your article will help open the eyes of many. Thanks for all you do. You are an amazing woman.

  • Veronica Solomon

    it really is easier to distinguish the two than most people will admit. It’s a great way to assess what you spend money on

  • Roz

    I know the difference between need and want and yet, I often make purchases that I just want. But I know that and stay within my means. Sometimes I have to pay our more than other times but mostly we don’t get in trouble. I actually used a graphic in a recent blog that showed a glass of water with these 2 words. The one area we could adjust is savings and we don’t discuss it very often. I will add to my list for 2014.

  • Tereza

    Not always easy to separate needs and wants, but it’s very important!

  • jessica

    i love the distinctions you draw here–a very educational read overall, thanks!

  • Wingate Wyndham Sulphur

    I am so glad I don’t run up credit cards and have those worries anymore!

  • Tina Ashburn

    My mother taught me the difference between “want” and “need”. Do you want it or do you need it? Good lesson.

  • Simona R.

    My resolution for this year was to waste less. Less of the half-used shampoo and body wash bottles, less clothes bought but never worn. I started the year by cleaning all my jewelry and displaying it properly so it will be easy for me to mix it and wear it, instead of longing to buy new pieces. Now that should help me save more money… 🙂

  • Scott Glaze

    Very important to understand the difference and prioritize.

  • Carmen

    So important to know what you really need. I think we loose perspective. It’s a good time to tune-in, if you haven’t already. Thanks for the distinction and reminder Sharon.

  • Connie, Social Media Buzzmeist

    Like Tina Ashburn, I grew up with my mother reminding me of the difference between needs and wants. This article is a great reminder – and then some.

  • Another great post.. So important to know the difference between our wants – desires and our needs – necessities.

  • robindavidman

    Some great information and it gives you something to think about. I believe I have a good handle on knowing wants from needs albeit sometimes the wants call out a little louder. That is when it’s important to weigh the difference clearly. The bottom line to me is to always allow for a small want within reason. If you work hard you should be allowed those little rewards.

  • Robin Pedrero

    it wouldn’t hurt to have a little better control over our money, especially our expenditures.
    On the surface that seems pretty simple.
    I agree.. I really enjoy your blog

  • Lynn O’Connell

    I remember when a friend of mine married a man with several children. She went from being a single professional woman to Mom of 3 overnight. And, suddenly, realized that those 3 trips a day to Starbucks were not so essential after all!

  • Yvonne

    It is so important to have control over how one spends money and replenishes it.

  • Diana Foree

    Perfect discussion. We have lost the difference between need and want. Everything today seems to be a want. In our family, needs always come first. Thanks for sharing this informative article.

  • Gillian ~ Gilly

    Excellent post Sharon! I think about this a lot mainly because I have 3 kids. It’s sometimes scary how you can get caught up in the want category and this article helps you put things back into perspective. Thank you 🙂

  • Pat Moon

    It is so easy for wants to slide into what we believe is a need. My husband and I are trying to decide what to do about our cell phones. We have the least expensive senior plan without going into a pay as you go plan which we may do. Most people seem to believe that a cell phone is a need.. but is it? We can justify having one for safety, etc. but yet when I was growing up having a 10-party land line was a luxury.. notice I say luxury not a want. Times and lifestyles certain do change our perspective on needs, wants, and may I add luxuries?

  • Robin Strohmaier

    Another excellent and thought inspiring post, Sharon! Yes, I do realize that how much of what I spend is actually up to me. Separating the needs from the wants can be a challenge, but definitely an essential discipline to practice. This can be a daily challenge, can’t it?