Differentiating between a “Want” and a “Need”
In Part 1 of the “Money and the Modern Man” series, we introduced the idea of basic budgeting and discussed the advantages of keeping a budget. We also pointed out the benefits of following a budget on all levels—emotional, educational, spiritual, and physical, indicating that man can become a fitter, healthier, and better balanced “gladiator” by implementing these financial strategies.
Is it a “want” or a “need”?
In 2008 the New York Times published an article, “Americans as Addicts of Consumerism,” stating average lifelong mass quantities of hamburger buns (12,129), hot dog rolls (5,442) and beers (13,248) consumed by the average American. Nowadays, consumerism of luxury items is at an all-time high with smart phones/tablets, video games and consoles, gym memberships, personal care, toys, car maintenance, clothing, shoes, eating out, movie tickets, and netbooks ranking highest (Forbes Magazine). According to Bain & Co, $275 billion was spent on luxury goods in 2011. In comparison, gladiators survived on basics: food, water, scant clothing, and good physical health. Times have changed, and consequently we need to make changes to manage our finances.
Definition of a “Need”: In financial terms, a “need” is something we cannot do without which is necessary for survival, the accepted standard of living and development.
- Mortgage/Rent/HOA/Maintenance Costs
- Utility Bills
- Car Payment/Maintenance/Repairs/Gas/Insurance
- Public Transport Costs
- Cleaning Supplies
- Hygiene Products/Services
- Debt Payments
- Child Care/Elderly Care/Doggy Day Care
- Emergency Fund
Definition of a “Want”: In financial terms, a “want” is something we desire (which often serves to increase self-esteem) but we can easily live without.
- Luxury Items (Cars, Boats, Jewelry)
- Additional Clothing
- New Technology
- Purchases for House
- Eating Out
- Health Club Membership
Note that some items appear in both categories (clothing, car); however it is necessary to not exceed the “needed” amount and to indulge in excess.
*Fun is an ambiguous category, especially as it is listed in the “Needs” category. However, as a lifestyle change, a budget has to be sustainable. Therefore, incorporating some expenses that would normally fall into “Wants” (e.g. eating out occasionally) into a “Fun” category can make the difference between success and failure.
Consider times when you have enthusiastically embarked on a demanding new fitness regime only to fail after a couple of weeks, compared to implementing a more moderate exercise plan that was easier to maintain and therefore more successful over time. Budgeting is much the same—make it work for you, address your debt, include funds for some treats/luxuries, make it manageable, and you will win the battle!
A budget is not a quick fix exercise but is for life.
Other ways to cut back on expenditure: Make adjustments to services to make them more affordable.
- Do you really need 300 TV channels or could you be just as happy with 150?
- Do you need a landline as well as a cell phone or are you paying needlessly for an unwanted service?
- Do you need a grande caramel macchiato every day, or could you get by with one once a week (and cut down your caloric intake)?
Lastly, what method of budgeting is right for you? This is a personal choice. Different methods work for different people because everyone’s needs, wants, income, and expenditure varies on their circumstances. Here are some suggestions:
- Notepad and Pen
- Budget Worksheet
- Envelope Method
- Online Programs (Dave Ramsey/Mint.com)
- Smartphone/iPad/Tablet apps
In Part 3, the final in this series, we will provide the basic instructions on how to apply a budget to your finances. We will also approach the common situation of finding a negative outcome after setting up a budget and explain ways to turn it around into a positive figure.
Bear in mind that setting up a budget is a very simple process with basic steps to follow; however, one size does not fit all—it is necessary to tweak and customize each budget for each individual to make it functional. Successful modern gladiators use their brains as well as their brawn!