Is it a NEED or a WANT?

You probably knew this, but in 2012 we (Australian Households) spent $642 BILLION* on living costs. Wow, that’s a lot of things we really NEEDED or is it not? So what is it about a human that drives us to want to spend? Is it the requirements of needs or the emotions of wants? Spending in its own right can really be defined into two categories - and for the time being forget how we want to slice the pie into 100 different categories to justify our zest for analytical information. In simple, spending is categorized as Needs and Wants. So lets work through the above using a few common examples to simplify things; Food: We NEED food to survive. We WANT to dine at a restaurant and eat food. Electricity: We NEED electricity to survive. We WANT an air conditioner. Transportation: We NEED to commute. We WANT to commute in a car and the list goes on and on… Make no mistake I am also one that’s get stuck in categorizing my spending as really NEEDS or WANTS.  But over the years I have noticed a pattern. The more I earn, the more WANTS become NEEDS but when we are looking for the next dollar to pay a bill, those certain NEEDS become easily identifiable WANTS. Given the above, can it then be said that the greater the money we earn the greater the difficulty to identify what is a NEED and what is a WANT? Or does the emotion associated to the expense, play a greater part? Well, It’s actually a combination of both. There is a correlation between money and emotion. The more we have, the heightened our emotions are too certain types of spending. We (humans) tend to convince ourselves (habitual spending) that what may be a real WANT in society, is actually a NEED. (Note: of course I’m limiting my focus to 1^st world problems at this point) But is there a way to reduce the level of emotion associated to a certain expense and the ability to really identify whether our NEEDS are really WANTS. There was a theory that I once learnt when dealing with an insurance broker. He explained contents of your house as WANTS “flip your house upside down, anything that falls is a WANT. Anything that remains is a NEED”. Can we really use the same theory in spending? Probably not, because clothing will fall regardless whether its Channel or Tarjet. What will work though regardless of money, status, or your social environment and be more in line with your circumstances are the three (3) questions I ask myself on every purchase.

1. Does it suit my current circumstances in other words do I need it?
2. Can I afford it? Or What penalty will I pay if I buy/spend it?
3. Is it value for money or is there an alternative option = is it worth it?

<by the way, if you answer no to just one of the above, then it’s a WANT> Now it takes time to start getting into the frame of mind to be able to remember these three questions every time you spend. But supposedly it takes only 30 days to change a habit or 15 days if you take a picture a make it your screen saver on your phone. <So Take a Picture of This> Do I need it? Can I afford it? Is it worth it? Good luck, I’ll be keen to hear how you changed your emotional spending. Till next time, “think, learn, and earn”!  

*source: moneysmart.gov, www.ibisworld.com.au, Australian Bureau of Statistics Household Expenditure Survey, 2009-10.

Posted 10 years ago 3 Minute(s) to read