Understanding the Difference Between Needs and Wants

 

By Lynnette Khalfani-Cox, The Money Coach®

To get a handle on your finances, you must be able to distinguish between your needs and your wants. You need food, shelter and clothing. But you might want a juicy lobster and seafood dinner, a large upscale home and brand-name attire.

There’s a difference. So don’t kid yourself and allow things that are really just dressed up “wants” to masquerade as full-fledged “needs.” Be honest with yourself also about how many of your dollars are going toward discretionary or luxury purchases. Food is a necessity; lobster, shrimp and scallops are a luxury. Many people who overspend will readily admit that eating out, entertainment and shopping are some of their guilty pleasures.

Your Lifestyle Choices

You shouldn’t have to feel guilty about your financial or lifestyle choices. But if you frequently have a bad case of “buyer’s remorse”, that’s probably a signal that you could stand to modify your spending in these categories. Even if you simply tweak your habits in these areas, it can make a real difference with your bank account.

For instance, to save money on eating out you can use restaurant coupons; say “no” to ordering drinks, appetizers or desserts; or when it’s a special occasion, choose to eat brunch or lunch out, instead of dinner, which is more expensive. To really save money, you could even take up a food-related hobby like baking or cooking. Not only will you learn a new skill, you also save money as you try to recreate some of your favorite dishes or recipes.

If gourmet cooking isn’t your strength, don’t worry. Just stick to the basics. After all, is pizza delivery really worth the price of at least $15 to $20 plus a tip, when you can learn to make your own pizza at a fraction of the cost? Sure, you may not save time, but your new food-related hobby can be fun—and a bonding experience if you get friends or family to join in on the activity.

Ultimately, there is a big payoff if you can become a person who is truly aware of the differences between needs and wants – and then you act on that knowledge in your lifestyle choices.

What’s the payoff?

You won’t be struggling economically or living paycheck to paycheck. Instead, you’ll have the financial resources on hand that will allow you to do both: get what you need, as well as occasionally splurge on what you want!

 

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Extra Credit provides general information to help improve our Member’s financial lives. Every situation is different, so please contact us for guidance on your specific needs. The advice provided in Extra Credit is not intended to serve as a substitute for speaking to a loan representative, financial advisor, or BALANCE counselor who can help tailor a solution for you.

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