What to save more money? Differentiate between needs and wants
Do I need that trench coat or I just want that trench coat really bad? These are the questions we all face every day. The real skill comes in differentiating between your needs and your wants.
One of the biggest ways to control your spending is getting to differentiate between your needs and wants. To me, sometimes I still find it a challenge to know what my needs are and what my wants are.
Sometimes I even find that my needs do seem to be wants and vice versa.
How can you separate your needs and wants?
The most basic definition is as below:
- Need: something that you need in order to survive
- Want: something you would like to have but it does not affect your standards of living.
A need is that one thing that you must have in order to make your life bearable and also that you need in order to survive. What does it include? Good and health food, housing, good and clean water, clothing that is weather appropriate, health care and even transportation.
A want, on the other hand, is more of a desire to have something nice. This leads to you having an emotional attachment to something that you do not need to survive.
Let me break it down for you.
- Need: a vehicle to go to work with if you do not have alternative means of transport. At the beginning nice second-hand car in good condition does the trick say KES. 500,000.
- Want: a newly imported sports car that cost well into KES. 10M
- Need: A place to live in. a smaller house or being roommates. A cost that can be lower than what others are spending.
- Want: a three-bedroom house where one or two rooms are unoccupied.
- Need: clothes are simply and presentable not so fancy.
- Want: a fancy designer dress by Dolce and Gabanna that you cannot imagine now having.
Before you kill the messenger, let me clarify somethings here:
The above are two extreme opposites but they are just examples. Don’t be content with your spending just because you see the wants listed as being too extravagant.
Some of us might be closer to the needs as stated. Suppose that you need to have a polo shirt for work that goes for about 1k but you might prefer the one that goes for 1.5K hence this might be classified more as a want because of more than you need but it is still way below the one you saw for 5K.
Sometimes this is the level where we all are and it is perfectly fine but don’t let this become part of ever-increasing wants and increasing costs.
Finally, at the end of the day, the money that you have earned is yours and hence you might feel to spend it however you please. I also do the same. All I try to do is to find a balance.
All the listed above wants are slowly killing our finances whether we like to admit it.
What are the ways in which you can change your spending habits?
- Change your attitude towards how you spend: get to know what your priories in life are and get to know what is really important to you and list it down. Keep referring to this list always and when tempted to shop, ask yourself if the purchase is in line with your priories.
- Consider before making a purchase: Before you buy, always ask yourself, “is this something I need and can I survive without it?” Ask yourself if there is something else in the house that can do what it is meant to do or is there a cheaper alternative? Every time you ask yourself this question, the better chance you stand to control your spending.
- Avoid impulse buying: Right before you give out that money, think really hard. Take 24 hours to find out if you really need it or want the purchase. This will always separate your needs from wants.
What Lesson can I use in my life?
Remember the 50/30/20 budget rule? Where it says to spend 50% of your net income on needs, 30% on wants and 20% to savings and debt? This will help you maintain a control on what you need and want.
This does not mean you should not subscribe to Netflix or anything; after all, what is 30% for? This budgeting technique helps one to align their spending and their priorities.
Nice one theređź–’
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