One of the most basic principles of successful money management is knowing the difference between needs and wants. Indeed, nearly everything about successful personal finances hinges on your ability to determine the difference between something you actually need to have, and something you merely want. Being able to draw this line is an important one, and failure to recognize the difference between needs and wants has led many into crushing debt.
The Transformation of Wants Into Needs
I think that one of the reasons our society as a whole has a hard time distinguishing between needs and wants is that we’ve become so accustomed to certain things being “normal” that we don’t even question their necessity. A prime example is a TV set. What was considered luxuries two generations ago are thought commonplace requirements for any household now.
Our increased purchasing power as a society — helped along by easy credit — has created a new “normal” that has many of us feeling as though modern life requires two cars per household, multiple computers, cable or satellite TV, video game systems and one room in the house for each child. All of this has led our society to a point where individuals feel deprived without the “basics” that we accept as a standard quality of life.
Due to this shift over the last couple of generations, we are a society that lives in luxury compared to most of the rest of the world, but believes that many of us are barely subsisting. Many of us might be surprised to take an inventory of our spending, and realize that many of the items we consider “needs” are actually wants, and that we could do quite well without them.
Super Sizing Our Needs
Even if we try to whittle out some of the wants in our lives, we might still find that we are confusing needs and wants. I’ve been thinking about this a lot as I ponder my housing situation. There are three of us in my family, and we have a four bedroom house. That’s two extra bedrooms: One room is used as my home office and for storage, and the other is guest room (since we often have company). Sometimes, we’ve even thought about getting a bigger house.
Yes, we need shelter. But do we need more of it? When I really think about it, the answer is no. While a bigger home might be a little more convenient, we don’t need a bigger house, as we have plenty of room. We get a little cramped in the dining area when we have guests eating with us, but that can be solved by building in a bay window to better accommodate us; there’s no need to buy an entire house. We’d be better off saving that money and doing something else with it, but mistakenly thinking the bigger house is a need is easy.
When it comes right down to it, there are a number of ways that we have come to expect a certain level of comfort and a certain number of material possessions to indicate success in life. However, if we took some time to really evaluate what’s important to us, and what we truly need, we might find that many of our “necessities” really aren’t so necessary.
This post was featured in the Carnival of Wealth.