Taking a Deeper Look at Wants Versus Needs

Let’s start off with an interesting statement.

I believe that many of the personal finance problems that people face are due to a confusion between wants and needs.

Not long ago, I used to think it was more a matter of a blurry area between wants and needs. I’d use that blurry area to justify some of my purchases – cell phone usage, expensive pens, and so on. These things were “needed” in some way, so I would just define them as needs and not think about them critically.

But what happens when I step back from that for a moment and think about these things with a seriously critical eye?

What do I actually need in life?
I need a roof over my head. Does that mean I need a house as nice as the one we live in? Not really – we could make do with something much smaller and older. Thus, quite honestly, probably half of our mortgage payment is a “need” and half of it is a “want.” The same goes for house insurance.

I need food and water. A majority of my food bill is a “need” – most of my purchases are simply covering staples and buying the basics of food for my family. I’ll also identify my water bill as a “need.”

I need clothing. I’m extremely tight with my clothing – what I do buy is used to directly replace something that’s falling apart, and as we’ve established, I wear clothes until they’re in very bad shape. Even then, when I do buy clothes, I’ll still spend a little above the need.

I need a means to earn a living to pay for the needs. That means at least part of our electric bill is a need, as is our internet bill, as both of these are required for me to write and earn income.

My wife needs a means to earn a living. Thus, our fuel expenses are largely a need, as is car insurance.

I need basic hygiene and health, as does my family. Those areas of spending are largely need-based.

I need to protect my family against my demise. Thus, for me, life insurance and disability insurance are needs.

Everything else is a want.
Part of my mortgage is a “want” because I want a big house. Some of my food bill is a “want” because I like delicious food. Cable? Want. Telephone? Want. Cell phone? Want. Wii? Definitely a want. Other entertainment expenses? Want. A higher-end computer? Want.

When you start looking at the small number of things in your life that are actually needs, you really begin to see how many things you buy simply because you want them, and then you start to realize just how much fat you can really cut.

For example, do I really need both a home telephone and a cell phone, especially if I’m already paying for high speed internet and my computer has a microphone and speakers? Of course not. I could just set up Skype and immediately eliminate the landline, then just get a prepaid cell phone and take care of the mobile bill, too. (My wife and I are actually migrating to this – we’re trying Skype on a trial basis as our primary telephony right now).

What fun is life without wants?
The point isn’t to abandon all of the stuff you want, but to realize how much of your monthly spending is tied to wants. It’s fine and healthy to want things, but when you’re sinking financially just to maintain things that you want, then there’s a real problem.

Try this experiment. Divide all of your spending into needs and wants. Before tallying things up, make a deal with yourself – for every dollar you spend on a want, put a dollar into savings for the future. Then tally things up.

When I did this, I realized that the majority of our spending was on things that were merely things I wanted. Looking at those wants with a more critical eye – eliminating some and putting a bit more focus on the things most important to me – led me to making some cuts in my spending that I might have otherwise just assumed as a given. That’s made a big change in my spending choices – and has put some cash right back in my pocket.

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  1. Very true.

    We have a couple of friends who have no land line (just cell phones), no cable (b/c they don’t watch TV anyway) and they are also able to manage with one car. They are really good at differentiating between “needs” and “wants” and thus are saving a big chunk of their paycheck without feeling like they are sacrificing too much. I am trying to watch and learn!

  2. Joe says:

    Okay – but what is the point of living life and saving money if it is not to indulge the “wants” just a little bit? I think this is where PF bloggers really lose sight of the trees for the forest – life is as much about the journey as about the destination. What is the point if you save up $5 million at retirement, but lived a miserable life getting to that point?

  3. Nicole says:

    I really enjoy your posts and agree with a lot of your ideas, however I urge you to consider keeping your landline instead of relying solely on Skype:
    http://www.cbc.ca/canada/calgary/story/2008/05/05/rethinking-voip.html

    Landlines are apparently more reliable for 911 calls, as a Canadian family discovered tragically this week.

  4. michael says:

    @Joe:
    A miserable life is in the eye of the beholder.

  5. KellyKelly says:

    What about STIMULATION?

    Is that a “thing?”

    To money is about buying things, buying experiences, or buying a feeling of security (note careful wording there).

    One of my top favorite experiences is long conversations, in person, after a meal.

    I used to have people here to my house all the time, making this experience (talking after eating) inexpensive.

    For various reasons, my house now needs a lot of repairs that I am not able to make. So I am ashamed. Therefore I refuse to let anyone come in and see my house.

    So to get the food and conversation, I usually have to spend some money — on gas, on the restaurant bill, on pitching in for food at a friend’s house.

    I could just go without the food and talking. And for many years I have made these types of stupid decisions, to cut more and more and more of the pleasurable “things” out of my life to channel money toward debt repayment.

    There is a point where you become such a “money anorexic” that your emotional health starts to atrophy.

    Well I didn’t mean to vent. I feel very deprived these days and this post hit a nerve.

  6. Johanna says:

    First thing’s first: I’m not trying to be critical. This is something I think a lot about myself.

    You say that half your housing expenses count as a “need.” Even in Iowa, that still probably runs you at least a couple hundred dollars a month. To say that this expense is a need ignores the billions of people in the world who don’t *have* a couple of hundred dollars a month – and therefore have no choice but to do without even the minimum acceptable house that you say you “need.”

    Ditto for transportation expenses: Many, many people in the world do not have cars, or any sort of modern transportation. Instead, many of them walk for two hours or more to get to work every day, and another two hours or more to get home. Many of them walk for a day or more for something as simple as a visit to the doctor.

    Even if you define “need” as “things you need to stay alive,” it’s not at all clear-cut. Much of the state-of-the-art medical care extends people’s lives – so in a sense they “need” it to stay alive – but does it really make that much sense to say you “need” something that humanity did quite well without until just a few years ago?

  7. Serendipity says:

    Well put! It’s not about cutting out all the “wants,” it’s just about making sure that you’re getting the most satisfying wants out of your budget. For instance, if you live in a large home with a sizeable mortgage, you’re putting that want ahead of others, like travel or “stuff.” By truly classifying needs and wants accurately, it’s easier to stop feeling pinched and squeezed and more like we have choices.

  8. KellyKelly says:

    Joe,
    I think I know what you mean … maybe it’s not “miserable,” but “miserly.”

    Plus, I know some people who put off their dreams until retirement and you can guess what happened. Death, death of spouse, cancer.

    That’s why I get so mad at myself for being such a workaholic/moneyholic. This time of year is the worst for me — watching others take the weekends to go hiking and biking and planning vacations. I don’t feel I deserve ANYthing until I’m debtfree.

    It’s a sickness. I don’t want to live a miserly life.

  9. AverageAK says:

    I didn’t think this post was about giving up all wants, so much as identifying the difference between a want and a true necessity.

    One of the benefits of identifying our wants, is that we often find out some of the things we thought we wanted we don’t really want at all.

    Cable tv is one for me. My husband and I hardly watch it. The kids watch it, and they don’t “need” to. So it is really an unwanted want, that should be gotten rid of.
    If you really like your cable for whatever reason, it might be a “want” worth paying for, but not one to be confused with need.

    Taking a step back and identifying where things go in your priority list is smart financially and emotionally.

  10. Joe says:

    KellyKelly: “miserly” is what I meant to say – thanks for the correction. I guess this is what happens when you don’t proofread.

  11. Carrie says:

    I have to agree with Joe: many PF bloggers lose sight of the forest for the trees. Although I’ve saved up a lot of money, I regret not being a little looser in the past with my finances so I could enjoy a few wants. I barely bought any clothes, didn’t buy my first couch until I was 37, used a garage sale dining set until I was 38, and I rarely went out in my 20s because I was afraid to spend ANY money even though I made 6 figures. I’ve since learned to loosen the purse strings a bit and am MUCH happier. It is possible to be a financial anorexic, but for some reason PF bloggers gloss over this fact.

  12. Laura says:

    I think many people are taking this concept to an extreme perhaps not intended. I don’t get the feeling that by dividing our lives into needs and wants we then must automatically cut (or feel guilty about) anything in the want pile. Instead, it makes me feel glad to realize all the wants that ARE currently getting fulfilled, regardless of any unsatisfied desires for a trip to Hawaii or if I decide to then hold back on getting a new cell phone.

  13. Daniel says:

    I find that spending money on wants is ok as long as you are saving enough for the future(retirement, emergency, home) and not spending more money than you earn. To get money for your wants some people may live frugal for a period of time or they are frugal on certain things such as clothing or entertainment.

  14. aa says:

    The new generation doesn’t own a landline anymore (as an AT&T insider told).

  15. sara says:

    my husband and I have no cable, no land line, one car, live in an itty bitty apartment, and are completely content. We don’t see it as “missing out” on wants, but prioritizing our wants and needs- we REALLY want to have a big downpayment saved up for our first house, in the area we want to live. Its really easy to temporarily not indulge in every small want, and instead work toward our major need/want. Delayed gratification, i believe its called?

  16. Brian says:

    When I build my budget each month I include the things Trent mentioned plus IRA, investments, and savings as “needs” that will get me to a comfortable retirement. All money left over can be spent on “wants” and there’s no feeling of guilt because current and future needs are taken care of.

  17. Experts on Credit says:

    I give up plenty of things that appear to be more of a want than a need. But sometimes, it’s healthy to indulge.

  18. Lurker Carl says:

    Take note of the fabulously wealthy families from the 1800’s like the Vanderbilts and Astors, where is that wealth now? Billions of dollars all spent in one generation for the sake of appearances. Two generations worked to build great industries and the third generation blew it on extravagant houses, parties, clothes, travel until every last penny was gone. Want or need?

    Even Michael Jackson and Mike Tyson succeeded in spending their vast fortunes with extravagant lifestyles. They didn’t need successive generations to spend all that money, they managed to do it themselves. Want or need?

    I notice young adults in American culture “living large,” just like their superstar idols but without the wealth to afford that lifestyle. Leased cars, overpriced clothes, electronic gadgets, and extravagant houses – surrounding themselves with luxurious trappings but all purchased on credit and one paycheck from poverty. Want or need?

    I chaperoned a senior prom last weekend, the kids arrived driving all sorts of expensive automobiles. Most high school seniors can barely afford the gown, tux, flowers and meal that go with such an event, much less a new Chrysler 300 or Mustang. Who were they kidding? It was a display of wealth and sophistication that everyone knew was a facade. Working at the grocery store and cutting grass after school doesn’t even buy a college education anymore, forget about any expensive trappings. But most of those kids will carry this spendthrift behavior throughout their lives. Want or need?

    This is why PF folks champion bare bones living to the financially strapped. People have no concept of living beneath their means. They need that strict financial anorexia to shed all that excess debt they gained. Want or need?

  19. cv says:

    I like this breakdown. I wonder a bit about the water bill, though. Drinking water is certainly a need, as is some amount of water for cleaning, but do you water your lawn so it looks nice? Water flowers (not a vegetable garden)? Wash your car often? Run small loads of laundry, or run the dishwasher when it’s not completely full? Do your kids ever play in the sprinkler or have a kiddie pool in the yard? I live in the water-starved west, so it seems a bit disingenuous to just write the whole thing off as a need when water scarcity is an issue for many people.

    On the other hand, I’ve always rented apartments where water was included, so I don’t have a sense of how much a typical water bill in the Midwest runs each month.

  20. Jim says:

    I think its a good exercise to split your bills into ‘want’ and ‘need’ piles and really be critical of what you really ‘need’ when doing so. But of course you don’t want to go too far.. being too miserly is counter productive. I think Trents point is really to think critically about what you call a ‘need’ cause often it isn’t necessarily a true ‘need’.

    BTW, Skype does not support calls to 911 emergency service. http://www.skype.com/allfeatures/no911/
    I’d keep that in mind if you’re thinking of dropping the land line for VOIP.

    Jim

  21. Jay says:

    Whoa! Back up the train! You say both you and your wife NEED a means to make a living??? That’s gotta be a want, not a need. A family CAN live off one income, but you have to make choices.
    AS a culture you are right: we confuse needs and wants, and obviously what could start off as a want (buy something) can turn into a need (pay back the debt). Nothing wrong with wants, it’s just the confusion between the two that gets us in trouble.
    I have been told that many traditionally less affluent cultures have only one word in their language for “need” and “want”. They don’t have the luxury to separately contemplate “wants”.

  22. Jarrod says:

    It isn’t about hacking out all of your “wants” and leaving only “needs” and “savings”. It is about prioritizing. So one can sit down figure out what their needs REALLY are, and manage their wants from that point. In the budget my wife and I have (though admittedly don’t keep too close of a watch on) we budget for some of those “wants” like entertainment. So we can still enjoy life and our wants, but not at the sacrifice of our needs.

  23. Jeremy says:

    It’s good to point out the distinction between wants and needs. What most people miss, though, is that most of the needs are in fact wants.

    Let’s see: typical service or factory worker in China:

    – Lives in dormitory style housing – ie 4 to 20 to a room.
    – Has as only personal goods a bit of clothes and a cellphone
    – Eats the cheapest of meals
    – Can’t afford real medical care
    – Sends home most of income (the majority of $50-$200/month) to his or her family in the countryside to provide for needs of his or her family.

    Need is a relative term that depend on how much you can make or the kindness of others. As a society we have to live beneath our means to provide the necessary resources and labor to grow (lengthen and deepen) our capital base and transform former wants into needs.

    Nothing sets a need in stone like massive savings.

  24. Angela says:

    I’m so glad you posted this… I guess I myself go over these same ideas as I buy things. Just this weekend I bought myself some new clothes, on sale of course, and thought to myself, is this a need or a want? I feel guilty even though I really did need them. My husband and I are trying to save for a house downpayment so I think, clothes now or house later? That helps curb the spending every time!

  25. Miranda says:

    I think that priorities are the important thing here. You have to honestly look at your expenses, and put the needs at the top of the list. Then prioritize the wants after that. But you should stay within your means. If you don’t get all the wants on your list — and especially if you don’t get all the needs — it may be time to see what you can do to earn a little more money, or cut back on expenses.

    I especially liked the comment above about delayed gratification. As a society, we have this ideas that we “need” things now. When really we just want them now.

  26. jblee says:

    Great post Trent. Lots of people are really confuse and even tend to justify their wants.

    It’s alright to indulge in wants, as long as it’s not more than your need.

    And remember, defining wants and needs is different from every individual. That’s because each of us has our own unique situation and journey.

  27. Lisa says:

    I have thought about going without a land line, but I work at home and am on the phone for hours at a time. There are days when my land line is up but my internet access is down. There are days when I am without power, but still have a phone line. If I go to a Skype type phone service, what would happen when the power goes out?

  28. MS says:

    I’m sure you can carve a few Wants away from almost any situation. There are a billion-ish people surviving on less than $1/day.

    That said, I don’t see the purpose of this exercise as getting down to a subsistence level, but to blunt the desire for more wants and challenge a few assumptions about what can and can’t be cut.

  29. I definitely figured out wants from needs. I found myself in $21K debt in January and decided to kick my spending habit and just PAY OFF MY DEBT. They were both school loans and credit card debt, and I decided to just suck it up, not buy the beautiful shoes and fancy dinners, and put money away. I also sold the things I thought I “needed” and made money from there. Now, less than five months later, I am debt free. That’s right, I knocked out $21K from January till now. It feels great, and I no longer even think about spending something if I do not have the money for. I plan to save, invest, and allow myself indulgences where they are warranted. Thanks for your post.

  30. One of the advantages of identifying your “wants” is that you can enjoy them more when you understand that they are not necessities. I’ve seen a lot of people get cable because that is just what you do. They then went and bought a game system–because that is what their friends had, etc. They ended up spending a tremendous amount of money on things that weren’t really important to them.

  31. Bella says:

    Oh boy, A lot of comments regarding this delicate subject!
    Great article by the way! Pretty in line with questions I had lately. What are needs and/or wants?
    I beleive the secret is in Balance! A Little bit of indulging, A little bit of savings, A lot of appreciation of little and big things!

    I lately wrote an article about “satisfaction” (Unfortunately, it’s in french). To me, it’s all about Satisfaction. Quality vs quantity. Applying the same principles in finances is the same: Will the purchase of this good, and subsequently the utilisation of this good, be worth the big dream you are postponing? If so, go for it! If not, forget about it! Just keep in mind the big picture

  32. Macinac says:

    For comparison:
    House 3500 sq ft but I bought it 30 years ago and owe nothing on it now. We only actively use about half of it. I only heat 1600 sq ft and sometimes less than that.
    Water usage for March was 1081 cubic feet or about 8000 gallons or about 67 gallons per person per day. (Say What!!??) We have toilets that use only 1.6 gallons per flush, and a low-flow showerhead… The dishes are double washed: manually first then dishwasher (Hmmm…). The softener uses a lot for its backwash. The cost of this much water was $16.11 but the sewer charge is calculated as a bit over double the water charge or $38.11.
    Electricity for April was 589kwh, costing $59.91 or just over a dime per kwh. Electric stove but no TV.
    Gas for heating and hot water — The April bill was $130.28 for 112 therms. Much higher usage in cold months: maybe $300 per month.
    We spend a lot of money annually on the kids’ educational extras such as figure skating lessons (about $600) piano lessons (about $1500) French camp (about $1500) theater camp ($500). These are wants.
    Gasoline consumption is 30 to 40 gallons per month. Primarily local use but poor mileage due to cold starts and short trips. (at least half of this is want). Three vehicles: his, his, and shared. This is want territory. I walk all over town for exercise, but I drive for efficient accomplishment of errands.
    Purchase of pre-cooked food. Don’t know how much this costs but Mrs is tired of cooking so it is for maintenance of domestic peace and stability.
    There are 200 bottles of cosmetics in the bathroom (want or need?). I keep myself looking as ugly as possible so my wife and two daughters look good by comparison.

  33. Although I agree with you in principle — too many people assume things like cell phones are essentials — readers might want (!) to consider Maslow’s Hierarchy of Needs. The needs you’ve described above are the lowest on Maslow’s pyramid: physiological and safety needs.

    Certainly, humans only *need* to survive, but that doesn’t raise us much above the level of beasts. The other needs in Maslow’s hierarchy are, from bottom up starting at level 3, love/belonging, esteem, and self-actualization. Plenty of people around the world are lucky if they can attain those first two or three levels of need, but most of us in developed nations have the freedom to attain the others — which could involve purchases that are not absolutely necessary to survival but can help us fulfill higher human psychological and spiritual needs. Perhaps your cell phone fulfills the love/belonging need by keeping you in touch with distant family and friends, for example. If you didn’t use your cell phone, you might be spending money on a landline, or letters, or transportation to see them face-to-face. All cost money.

    Sometimes frugality discussions can get too strident about defining “needs” as only those things essential to survival. Maslow’s hierarchy reminds us that there’s more to life than merely being alive — although many of his needs can and perhaps should be fulfilled without benefit of consumer spending. :-)

  34. gr8whyte says:

    Life cannot be lived at the extremes of needs or wants. Pratice moderation — spend some on needs, some on wants and give some away.

  35. Mike says:

    For the most part, I’m totally with you. It might just be a meaningless theoretical thing, but I’m not sure that there’s ultimately a difference between a want and a need… yet knowing the difference is critical. Is that too weird a way of putting it? I mean, you don’t absolutely need to even live, but you want to, so you make choices that lead you in that direction. Maybe it’s just all about having goals!

  36. "Mo" Money says:

    Good post. It is not easy to separate wants from needs. Basically anything other than food, housing,clothing and transportation, is a want.

  37. tightwadfan says:

    Great post. This topic is so key to sound personal finance. I think it ties in with the Born to Buy book – the purpose of marketing is to convince you that a want is a need, and it’s really not healthy to expose kids to that mental confusion when they’re young. That’s how so many of us end up in financial trouble. Once I learned to distinguish between wants and needs I was able to live within my means (very tight at the time) and pay off my debt. It was tough at times but it was worth it, and later when my income increased to a comfortable level I was able to enjoy indulging my wants without any regrets afterwards. And I know that if I ever had to live on a small income again I have the skills to live within those means.

  38. Shan says:

    As we all know we do our best to get our needs fulfilled. And what suppose if your want becomes your need….

  39. FMF says:

    I’m tracking with you 100%. In 15+ years of helping people get their finances on track, I’ve seen some interesting expenditures classified as “needs.” For example: a weekly pedicure, a new boat (no, he wasn’t a pro fisherman), and exotic vacations.

    The confusion between needs and wants is what keeps many people from achieving financial independence.

  40. Kathy says:

    The one thing my mother taught me was to fine-tune my “needs”.
    One time we were shopping for a new coat for me. At the scale that most people buy clothes today, this may seem like no big deal, but it was then. I only got my basic needs. Most of my clothing was hand me downs from older sisters.

    I fell in love with one particular coat. She MADE me go around to other shops and look at other coats, and it was just pure agony to me at the time, I was so frustrated. But what I ended up with was a coat I liked much better, and at a much more reasonable price.

    Great lesson in practical economics!

  41. Deb says:

    I’m all for happy balance between wants and needs. If you’ve ever looked through a women’s magazine though most of the “needs” are described as $300 shoes and $600 purses. When we put our focus on our happiness being based on stuff rather than relationships we are cheating ourselves. The rush of a new purchase usually fades pretty quickly. I enjoy technology and eating out as much as the next person but when I sit down to pay the bills and I can’t save anything I have to realize I want a secure retirement more than I want PF Chang’s.

  42. Tyler says:

    Great article, and something that I’ve been looking at to help cut out a lot of extra expense. You mentioned testing skype as your primary phone – what is your position on the lack of 911 service? I assume you will rely on you cell phone for this. I’ve been testing the service also, but I’m not sure that I can get around that aspect.

  43. Susan says:

    I think the guy who wants his daughters and wife to look better than him is smart and funny (comment #24) I think the point is to be aware or whether you NEED something or WANT something and THEN make your decision. I have teens now and that is hard – they don’t NEED to go the Prom – dress, suit, hair, makeup – cost of ticket, etc. – however am I going to deny them this experience? No way – I will fork over the dough and wish them a great time.

  44. Trish says:

    Thank you for writing this article! I live on a very limitted income due to medical issues. I thought I was doing a pretty good job, already, of distinguishing between wants and needs. But, you brought up some things I hadn’t considered. Also, I will definately be adopting your suggestion to match each dollar spent on a “want”, by putting a dollar in savings.

  45. Jon says:

    “My wife needs a means to earn a living.”

    I have to agree with Jay. Are you sure about this being a need? I think this is more of a want by both you and your wife to live a more comfortable lifestyle and send your kids to an expensive day care.
    Remember, needs are what is required to survive. Wants bring the comfort level up.

  46. luvleftovers says:

    In some ways, I feel lucky that some of my NEEDS are now my WANTS.

    Example. I NEED a good emergency fund and I NEED to pay down debt. Well, I’ve been working on that long enough now that I also WANT a good emergency fund and WANT to see the debt numbers go down.

    When I see the EF go up a little and the Debt down a little, I actually get a buzz from it!

    Of course, I indulge in some other WANTS now and then, but I find that I think about them much more before buying and they tend to be a bit more practical than they used to be. It’s a nice balance now and I don’t feel guiltly about those theatre tickets I have for the middle of the month!

  47. harmzie says:

    Excellent post. Seems to really have inspired some reflection and self-reflection!

    I get really annoyed when I tell people that my DH stays home with the kids and they say “wow you’re so lucky to be able to do that!” No. We *decided* to do that and made it happen. We are without much, yet still *decide* to be with much more! (ahem… which may or may not be why I am poking through a PF blog)

    When our third child was on the way, many said “I guess you NEED a minivan now, huh?” NO. We have *decided* that is not necessary, and did a little research to find something to fit three seats in the back. And so on.

    The danger comes when you aren’t *deciding* but being told, and/or just assuming what you “need” without evaluating what your needs really are.

    Thanks for making me consider again (and many others, it seems!) my needs vs. wants.

  48. constant learning says:

    In response to comment #21 – wants and needs really depend on your values. For example, reading books can be classified as a “want” but if you are improving your education, books might be a “need”. Do you think that education is a necessity? You can certainly survive without it.

    However, to support the values and lifestyle that they choose, one person may consider the same item a “need” while a second person may consider the same item a “want.”

    I personally believe that good, clean water is a necessity – a “need.” People have survived without clean water; in many parts of the world, clean water is a luxury.

    My chosen lifestyle includes clean water, a good home in a safe neighborhood, books, and entertaining other people. It does not include cable tv, fast food every night, or a new car. That does not make my chosen lifestyle better than anyone else’s. It just means that I need to clarify what my lifestyle will be and determine from that point what my “needs” and “wants” are. It is important that my “needs” and “wants” are not dependent on other people’s image of what “needs” and “wants” are. Advertising should not sway me (even though it does on a daily basis).

    So the important thing is that I examine what my chosen lifestyle will be and make choices consistent with that lifestyle and not choices dependent upon advertising, pressure from others, or mood! On a daily basis, I need to examine my impulses and ask, “Is this a need or a want?”

  49. KellyKelly says:

    Dru (#33),

    Excellent post! That’s right, we can “survive” on rice and water living in a cell, but what kind of life would that be?

    To use the bleakest most spartan contexts as a baseline of “enough” is forgetting that we have human brains and (as I said way up above) need stimulation.

  50. JimmyDaGeek says:

    As my kids grew up, I would tick off the five things that we NEED to survive: Food, Clothing, Shelter, Transportation, and Medicine. It was these things that my paycheck went to buy. I would then describe the difference between a need and a want, with a need being the cheapest or simplest thing that would satisfy the need. White bread vs. focaccia, a starter home vs a mansion, designer jeans vs Walmart, city bus vs car.

    I explained that there is nothing wrong with wants, it just means you are spending more money for something you don’t need to survive. I was trying to make them understand that buying wants are choices we make and that we should be conscious consumers instead of buying into fads. Every dollar spent now on a want is one less dollar to spend on a need later. I was trying to teach delayed gratification.

    Our society has morphed into a “gimme now, buy now, pay maybe” culture. The current financial mess is a direct result. People give lip service to delayed gratification as they justify their buying as being “deserved” or a “small splurge.”

  51. Carol says:

    Regarding clothing as a need versus a want, Trent says he hardly spends on clothes, but as a working woman, I need to spend money on clothes to make a decent appearance in the business office. Although my office adheres to business casual clothing every day, I still find that trying to keep my clothing appropriate, I spend more than I’d like to. I have shopped thrift stores in the past, but find myself not liking the item after a few wearings. Woman probably have more *needs* in the clothing area (if they work in a business office).

  52. Phil A says:

    I need a beer.

  53. Phil A says:

    I want a Guinness.

  54. James says:

    This is a very good posting, however its also important to consider the psychological aspects of needs vs. wants.

    Much of behavioral finance suggests that peoples decision making surrounding money has as much do to with actual material needs as it does with psychological needs.

    For example, many people choose to spend money on conspicuous consumer goods may actually be responding to an underlying unconscious need, e.g. they may be responding to feelings of inaequacy, parental modeling, etc.

    Best,

    James

  55. Pamela Munro says:

    I agree that it’s a good exercise for most modern Americans to try to distinguish “wants” vs. “needs” – but I also remember my Swedish grandmother who saved $ on her social security & deprived herself of many small pleasures. There is a medium ground here. It’s true that most women have to spend more on their appearance than men – my philosophy as a pennypinching actress has been to maximize my earnings by getting the best deals possible. I would suggest that the business woman look at resale stores and the sort of thrift shops that get hi class clothes. They usually have donors from wealthier areas. It all comes down to CHOICES. We have many more than we think. It just depends upon what is important to YOU. When I grew up my father was perversely proud that we always had the oldest car on the block – but we did have $ to spend on records and theatre tix!

  56. Andy says:

    LOL, great post, Trent. One question: Why do you say “telephony” with a “Y” on the end? Was that a typo?

  57. Sharon says:

    Every adult NEEDS to be able to earn a living. Trent has insurance that MAY provide for his wife and kids, assuming that nothing bad happens to any of them. If Trent has died and there is a car crash and one of the kids ends up severely injured, or his wife does, all that money that looked so ample will vanish very quickly.

    If Trent (or any husband) dies or becomes disabled and loses his job, through which he has health insurance, all that money may well vanish. Any long-term stay-at-home parent ends up at a severe disadvantage in the job market. Working at least part-time keeps their foot in the door and gives them the opportunities should life throw a big monkey wrench into their plans that they will NOT have if they have been out of the workforce for long periods.

    Then there is the matter of temperament. Some people are simply not cut out to be a stay-at-home parent. They will go stark raving mad, but if they can combine parenting with a fulfilling job, everyone is happy.

    Staying at home for 10 years or more is not a viable career path. People who reenter the workforce after a long break lose an amazing amount of money, in the hundreds of thousands of dollars. They lose the immediate income, they lose raises, they lose career advancement opportunties, they lose retirement income opportunities of compounding, networking opportunities and many more.

    People who CHOSE to stay home with their kids need to know the financial sacrifice they are making. AND they need to be very sure that the stay-at-home parent has adequate life and disability insurance. I’m not sure of the numbers, so you better do some research to see what it would cost to replace that person’s services. It should be in the neighborhood of $200,000 for life and probably up to $60,000 in disability insurance.

    But nobody has the right to say that Trent’s wife’s NEED to work is a WANT. You could equally say that Trent’s NEED to work is a WANT and he should give up transportation instead.

  58. Jeremy says:

    Sharon, I liked your take on being a stay at home parent, but in regard to the lost raises and opportunities, which would be a factor, I would like mention that there are tons of people who have done the same job for 10, 15, 20 years and never got much more than a cost of living raise and are still dong the same thing (not that there’s anything wrong with that) but I would argue that a stay at home parent who was smart and motivated would still succeed in the marketplace and one that wasn’t would still NOT succeed, regardless of having taking time off from it or not. hope that made sense…

  59. Rob in Madrid says:

    don’t forget that many people are in a position of having to work for reasons of health insurance. And in many areas of the US good housing (as in a good school district) is unaffordable on one wage.

    I have to admit that after years of being tight, struggling with enough money that I’m finding it very hard to move beyond a basic frugality. It is so being able to shop with cash rather than credit cards, I want to enjoy actually having enough money for a change (although our level of income hasn’t changed) and some how being super tight again is an unpleasant reminder of how it used to be, even if it’s by choice

  60. jm says:

    I think it can go a step further. It seems to me that distinguishing between wants and needs is like the difference between empowerment and entitlement.

    Most people who live above their means seem to have a sense of entitlement: Not only do I want cable, but I am *entitled* to it, therefore I have to make room for it in the monthly expenditures. I can’t possibly do without it, because I need it.

    Those who make an effort to live below their means can achieve empowerment: I don’t necessarily need cable, but I like it, so I want it. I’ll put it in the budget, but if I have to trim the fat, I can do without.

    I have been critical of posts on this blog in the past, perhaps too critical, but this one is truly excellent. I think doing this full time is starting to pay off for you.

  61. Bill says:

    You can save a ton of money by downsizing your quantity of housing, even when upsizing the quality.

    Even though I grew up in a very large house (nearly 6,000 sqft) I’ve had no trouble living w/ my family of 4 in under 1500 sqft.

    That decision has saved me a ton of cash over the last decade, which I’ve used to upgrade the quality of the amenities in my small house – new, efficient HVAC, added real wood (no pergo) floors, etc.

  62. Sharon says:

    Jeremy, the “smart and motivated” stay-at-home parent needing to reenter the workforce is still at a big disadvantage even over those who do the same job and get nothing but cost-of-living increases. One aspect of job hunting is getting people to decide to hire you, and if you are currently employed when you job hunt, it is MUCH easier to find another job.

    And no matter how smart or motivated the person is, if they NEED to reenter the workforce in a down economy, they are at an even more serious disadvantage. The lack of networking, solid work references and a demonstrated history of showing up for work are going to hurt, big time.

    And don’t forget–lots of people who are steadily employed are neither smart nor highly motivated! And God help the stay-at-home parent who is neither and suddenly needs to reenter the workforce.

    Even if you don’t have a part-time job, volunteer with organizations so that you can have the experience, references and contacts you’ll need should the roof cave in. Take courses. Learn new skills, even if you have to ask your kids to teach you. You’ll be protecting yourself and your family.

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