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Spending Money: Needs vs. Wants


Let’s face it: Most people spend way too much money on things they don’t really need. The more money we make, the more we tend to spend. This endless cycle of materialism has led many people to confuse the word “need” with the word “want.” As in, “we need a big-screen TV for our new home theater.” Or, “I need a new pair of shoes to go with my new outfit.”

The pursuit of material success often is the root cause of burnout at midlife. In fact, a recent study at the University of California at Berkeley found that people primarily motivated by the love of their work grow dissatisfied as they begin to make more money.

The first step to breaking free from the materialism trap is to understand the difference between “need” and “want.”

Our needs are relatively few, even from birth. We don’t need a lot of stuff, toys, gadgets, etc. We need shelter from the elements, clothing, food, love and understanding. We need friends and family around us.

We do not need 500 cable TV channels, brand new luxury cars, 5,000-square-foot homes in exclusive neighborhoods, lavish ski vacations, and smart phones that do everything but think for us.

There is nothing wrong with wanting these things. But understand that these things do not make us happy, in and of themselves. And, they are often links in the chains that bind us to jobs we despise.

Studies have shown that the more advertising a person is exposed to, the more they buy and consume. What does this mean to you? The more television you watch, the more magazines you subscribe to or read, the more money you want to spend on things you don’t really need. Marketers are taught that success comes from selling to wants not needs.

One way to notice your wants versus needs is to go through your household, garage and attic and locate all those objects that you really needed to have, and which you bought, but lost interest in a few days later and they have been collecting dust since then.

I don’t suggest being too hard on yourself, because if you forbid yourself of every pleasure, your brain may rebel and send you into a buying binge. Instead, start with a simple observation. Every time you are about to buy something, ask yourself whether you really need it and observe the response. One day this observation will result in your changing your mind and not buying the thing that you don’t need. Then it’ll happen again, and after some time you will be very comfortable at saying ‘No’, because you will feel good about making a better choice.

The amazing thing is that once you learn to live on less, it becomes a habit. The peace of mind that comes from relying less on materialism to define success usually leads to a greater and deeper happiness.

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Comments

21 Responses to “Spending Money: Needs vs. Wants”

  1. Golbguru on September 26th, 2006 7:35 pm

    Nice post; a very rational way of looking at things.
    Unfortunately, we fall for instant gratifications really fast and anything rational is thrown out of the window. A trick that works for me is never buy anything the first time to “want” it; sometimes, the urge to buy dies the very next day – meaning you really didn’t need it. If after a few weeks you still “want” it…you probably “need” it.

  2. Carnival of Personal Finance #67 » The Weight of Money on November 2nd, 2006 12:57 pm

    […] Accumulating Money’s Need vs. Want. This seems like an ongoing dialogue with the partner, classifying things as a need or want. He seems really stuck in the everything is a “need” category. […]

  3. Accumulating Money » My 5 most popular posts of 2006 on December 26th, 2006 10:42 pm

    […] 4. Spending Money: Needs vs. Wants – The first step to breaking free from the materialism trap is to understand the difference between “need” and “want.” […]

  4. SDCI student on February 9th, 2009 10:36 am

    this was awesome considering iam a student taking business it taught me alot

  5. Stephen on March 16th, 2009 12:43 pm

    yeah, people reach the limit of needs that is why people stop spending!

  6. nikki on March 31st, 2009 10:23 am

    why spend money when you could just spend it on food and stuff you need

  7. kiki on May 18th, 2009 12:32 pm

    blablablablablablabla money is too much of a hasle it is way to difficule so blablablablablablabla

  8. Richard on October 16th, 2009 1:33 pm

    Every Dollar You Spend

    Financial planning expert Jonathan Pond has often observed that “your best dollar is the one you don’t spend”. From the point of view of securing your and your family’s futures, there could not be a more accurate statement. Every time you spend a dollar, you give up the future value of that dollar. You lose the power that comes from possessing a sum of money. You also pay a very high price: you pay the “opportunity cost” of using that dollar in a better way. An example, though quite painful, will help you to see this concept in action in a way I assure you that you will not forget.

    Had you invested about $10,000 in stock of chewing gum maker William Wrigley in April, 1986, your investment would have grown to $265,000 by early 2008. You would have been receiving cash dividends of over $7,000 per year. Yes, your annual cash receipts would have been 70% of your original investment. It does not end there. Earlier this year, Warren Buffett and Nestle purchased William Wrigley, Jr. Company for $80 cash per share. Warren and Nestle would have sent you a check for $360,000. This is quite a result from a $10,000 investment in a company that was well known in 1986.

    How did you spend the $10,000 you had during the mid 1980’s? On cars, clothes, lunches, dinners, trips you can’t remember, staying at overpriced hotels and renting cars? Look around your house, in the basement and in the closets. That’s what you spent it on, that is, what’s not already gone to some poor landfill. Neither Buffett nor Nestle would send you a check for any of that.

    To have made the Wrigley score, you needn’t have had the $10,000 all at once. You could have bought $500 worth and made additions through Wrigley’s dividend reinvestment plan. Many great companies had them then and have them now. Wrigley stock returned 16% or more per year for all the years from 1986 through the Buffett/Nestle buyout.

    You don’t lose $1 million by carelessly misplacing it. You lose it $50 and $100 at a time, buying things you don’t really want and certainly don’t really need. You lose that future $1 million (or perhaps much more) with every dollar you spend.

  9. Toni on December 20th, 2009 6:25 pm

    Adults need to be educated on Needs and Wants. Students are taught Needs and Wants at age six in Virgina. Students are given the definition of items need to live, food, shelter and clothing.

  10. logan connell on January 21st, 2010 8:02 am

    money is a good thing to have but dont ever let it get in the way of family and the more important things cause sometimes your wants can pull you away from the things that really bring you happiness

  11. Lash on August 17th, 2010 11:57 am

    Needs vs. Wants is a Big controversy because someone needs might be considered your wants and vice verses. The important thing in the end is not to be selfish with your money.

  12. Devan Hall on September 7th, 2010 10:06 am

    Need v.s. want is a tough decision to make. if you dont need something there is no point in buying something if you dont need it,but therefore some people spend money just to be spending it. but i have learned NOT to spend money on something that i really don’t need!

  13. Nicholas Cagle on January 24th, 2011 9:57 am

    Needs v.s. wants is a difficult decision to make. You need to always keep up with your savings, like putting them in a savings account. You dont need to spend your money on things that you dont need.

  14. otis Houston Jr on January 25th, 2011 6:54 pm

    Save a part of all you earn money don’t spoil money keep.

    A whole lot of little bit make a big bit.

    A slow crawl beat nothing at all.

    A need or a want

    I rather have 500 in my pocket and overalls on then a suit on and broke.

    The secret Millionaire.

  15. qdv on September 22nd, 2011 12:33 pm

    spending help reduce stress and keep the mind happy, spend too much will make it a habit. Spending money is like a reward for yourself for all the hard works and things you done for others.
    I would say once a while go and spend on something you always wanted, thats what keep life interesting.

  16. Deanna on August 27th, 2012 7:17 am

    alot of people think the things they want is what they need their so brain washed till the point their shopping for what they want and not what they need

  17. jessica gamble on October 24th, 2012 4:04 pm

    I personally think that in life your needs come first that way you always have the basic things needed to survive like power, water, food, and shelter. I always make sure I have what I need first rather than worrying about my wants.

  18. Kryssa Humphries on August 26th, 2013 5:58 pm

    I have been blessed with a very wise mother. She has taught me over the past 15 years that everything you want doesn’t mean you need it so she doesn’t let me buy it. So by being taught this just because I think I need it doesn’t mean I really need it so most of the time I just put it back and walk away I’m very glad my mother taught me these things.

  19. victoria nath on November 1st, 2013 11:28 am

    i wish i had money

  20. kyle barnhill on January 17th, 2014 7:48 am

    i think u should save money because i saved money four a year and i had 1120 dollars and i bout me a good car and i still have to this day in the shape i bought it in brand new almost

  21. Hank on February 3rd, 2014 12:30 pm

    i believe people need to know the difference between wants and needs

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