Understanding Wants and Needs to Improve Your Finances

Financial Pilgrimage

Whenever you open up a news site, go shopping or fill the gas in your car, it can remind you of how expensive everything is. Financial experts remind us to tighten our belts and watch our spending as the cost of living rises. If we’re not careful, we may be unable to afford to pay for our necessary expenses, let alone extras.

But, for many folks, drawing the line between what is necessary and what is nice to have is challenging. In other words, it can be challenging to differentiate needs from wants.

Understanding Wants and Needs

In the simplest terms, a need is something you require to live and function, while a want improves the quality of your life and that you enjoy having. Viewing wants and needs by this definition may seem easy to break down. You may think that needs would be the same for everyone and include things like food and shelter, and while it does on a fundamental level, it is more nuanced than this.

Examples of wants and needs often differ among individuals and families. You can attribute the differences to various factors like where you live and access to services.

Let’s look at a few examples.

Everyone would consider transportation a basic need. You need transportation to get to work, get your kids to school and run errands. However, if you live somewhere that has reliable public transport, you probably don’t need a car. Similarly, if where you live everything is within walking distance and it is safe to walk, you can go without a car. However, if there is no public transport or it’s unreliable or unsafe, and you live somewhere where it’s impossible to walk to where you need to go, you will need to buy a car.

So, you’ve established that a car is a need and that you will use it often. You will use it to go to work, take your kids to school and sporting events, and for all your other errands. So, what car do you get? You can get the cheapest car possible because you need to get from A to B, but an affordable car can come with problems.

It may not be safe as it has fewer safety features, and if you’re using it to transport your kids, this is a significant risk. Cheap vehicles may also come with other issues and may need lots of repairs costing you more in the long run. Lastly, if you have a big family, you probably need a big car to accommodate everyone. In this case, a more expensive vehicle is necessary for your life.

On the other hand, a cheaper car might suit your needs if you are a single person who only requires a vehicle to drive a short distance to work and won’t use it much.

If you’re struggling to establish whether something is a want or need, ask yourself if it’s possible to live and function without it. For example, can the need be met less expensively if you need it to live? Then think about what your life would be like without it.

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