Everyone has to make financial decisions. Yet many of us get it wrong more often than we’d like to admit. So how can you tell the difference between needs and wants? The truth is that anyone can fall prey to misidentifying their needs and wants. But there are ways you can make smarter financial choices.
Assess your needs
Do you know the difference between a need and want? When you need milk, you pick up the gallon sitting in your fridge. You get it because you’re out and it’s easy. But when was the last time you just wanted milk? Maybe you want some with your cereal, or as part of another recipe. As soon as there’s an option with more or less cream, or by the flavored milk, you start to wonder about what else is out there — maybe you’ve heard of pastured cows? Or maybe even raw milk? So when deciding on things for your home, what do you get; a need or a want? Do you know the difference?
In this article, we will go through the steps to identifying your needs.
The process of identifying your needs isn't as easy as it looks. It starts with a very general sense of what you need out of your life. You need to look at your goals, your values, where your passion lies, and what motivates you. What motivates you? Those are the questions you need answers to before you can begin to fill in the gaps in your life with meaningful work. Once you have the answers to these questions, it can be easier to start putting together a plan of action.
Here’s a shortlist of some common expenses that fall under needs:
4. Gas and electricity.
If you are having trouble figuring out what your goals are, it’s probably better to stop trying and figure out why than to find out and try again.
Prioritizing your needs
Prioritizing your needs means first looking at what’s most important to you. This goes beyond just deciding what you need physically or emotionally.
Prioritization can be tricky. Being able to prioritize your needs can be valuable in that you know which tasks you can afford and which tasks are more important than others. With a little practice, however, prioritization becomes second nature. Let's take a look at how prioritization can help improve your workday and increase the quality of your work at work.
Assess your wants
Once you've identified your needs, it's now time to start identifying the wants that are worth the money or investment that will make those needs feel fulfilled. Sometimes a cheap gadget is just what you need, and you won't find anything better for long-term use elsewhere (e.g., a tablet computer). Other times you'd need something huge (e.g., a house or beach vacation). These examples may be obvious, but you may not realize that other needs might actually fulfill themselves through other things.
Wants typically include things such as:
3. Designer clothing.
4. Gym memberships.
5. Coffeehouse drinks.
Needs are physical things, wants are emotional things.
For most of us, needs are physical things that we want to fulfill. When we try to fulfill our physical needs without thinking about the emotional needs of self-actualization, we become unfulfilled. We want the stuff that makes us feel good, not the stuff that's necessary to live a happy healthy life.