Needs Vs. Wants 101
In America, sadly, the lost art of saving and money managements have become victims of our current thorny monetary crisis and we have no one to blame, but ourselves. The solution begins not just in determining needs vs. wants, but at all times, especially in these times, telling certain brutal truths to ourselves about our personal finances.
First, we all need to review a childhood course, which few schools and most parents failed to include in our financial planning education. It's should have been called:
NEEDS VS. WANTS 101
PREREQUISITE : Both parents and teachers active and on-going participation in this financial education for kids course.
COURSE DESCRIPTION: A presentation of basic financial freedom life skills, with an emphasis on knowing the difference between needs (obvious things that every person needs to stay alive) vs. wants (anything else). This financial literacy course is designed to introduce students to evaluation skills in determining truth in advertisements; determine the level of their wants; and instructs them in ways to say "NO!" when they really want to say "YES!" to their wants, necessary for financial security.
Additionally, students will learn family economics and financial education skills to evaluate what they see, hear, and think about the purchases they will make throughout their lives. They will learn how to live debt free and how to get rid of credit card debt, should they find themselves in an unavoidable financial situation or hard economic times. Successful graduation from this financial education will insure their participation in becoming education finance partners with subsequent generations.
Who Should Take This Course?
RECOMMENDED FOR: Everyone who desires to live above the poverty line and master financial literacy.
However, in a perfect world - the one we don't live in - most of us weren't offered this course. Therefore, as self-learners, with most of us learning financial literacy the hard way, we will need to teach ourselves (and our children) the self-discipline to know the difference between our needs vs. our wants. Essentially, it should be a very simple concept.
Are your needs getting in the way of your wants?
Slow Economic Times, Rising Costs, Inflation, Foreclosures, and Bank Take-overs
In today's current financial climate, ask anyone around you and they will have a financial tale of woe to share:
- Their story may be one of debt.
- Their story may be one of having to cut back on things they used to enjoy, and can no longer afford.
- Their story may be one about sacrifices they now have to make.
- Their story may be one of very real fear about a very uncertain financial future.
- Their story may be one of foreclosure.
- Their story may be one of losing a job.
- Their story may be one of a medical crisis forcing them into bankruptcy.
It doesn't matter what the individual story is -- the fact is everyone, inside and outside of this country are worried, concerned, and watchful.
Understanding Need -- Just One Basic Need -- Water -- As an Example
On the surface, beyond the basic needs of food and water, shelter, clothing, and some transportation, almost everything else falls into the category of "wants." Where it gets sticky, in American culture, is in the details. Perhaps, part of the problem is that we simply have too many choices. An example of need, would be water - one of life's basic needs. Water is basic? Yes, but.......
Most of us can get our water from the tap. While some (especially those touting the kits for converting your car to run on water), seem to think that water is free -- it's not free. When you hook up to your hose, at some point you it's costing you money. You are either getting a water bill, or you are using electricity to pump that well. Not too many of the hand pumps being used these days.
Additionally, we won't even go into the problems that even if cars ran entirely on water, what price we would pay. Guess, I'm a little skeptical because I live in Florida, where watering your yard is restricted to twice a week. Can't see where 250 million registered vehicles on the road using even more of our precious water is going to make life better or less expensive. (Perhaps, that's a call for someone to write another hub on the practicalities of using water in this manner).
However, getting back to basic needs -- cost-wise water is generally affordable, even for the poorest of American families. However, a huge majority of us choose to buy bottled water on a regular basis. We have our reasons, some of them quite legitimate. So, this is where "need" morphs into "wants."
- What kind of water?
- Is the water going to be flavored?
- How much additional money are we going to pay for it?
- How far are we going to drive to obtain it?
- What kind of store are we going to buy it from (regular grocery or convenience store)?
All of these questions are ones we have to ask ourselves and think through. All of these questions also have a want factor involved in the thought process. So, you can see, most other need vs. wants questions, follow the same pattern - they all involve choices that need to be made. Making the best use of your hard earned money, involves being aware of when "need" can be a tight rope walk of "want" that lands you flat on your face on the ground if you are not careful.
The most practical steps that virtually every American can make, is to exercise maturity and constantly make an effort to learn the habit of living on less, regardless of wealth or lack thereof. Moreover, a life lived depending less on materialism in defining our "success in life" and spending more time and effort on that which is real - the things you do, the people you love, making a difference in this world - all ingredients to make the diligence in minding your personal financial "want list" worthwhile.
At what age should you begin to teach your children the difference between needs vs. wants?
One Part of the Equation of Financial Literacy is Understanding the Power of Advertising
Often people think they need things due to the power of advertising. It's the job of good advertisers try to appeal to consumers in such a way, that the consumers feel they need certain goods or services, when in fact they only want something.
We need to teach our children and educate ourselves about advertising and the tricks of advertising. It's easy to get sucked into believing you need something, that you later discover wasn't the what you really needed.
Teaching Children About Money
The Simplest Questions May Be the Hardest Ones
Do you ever ask yourself when making a purchase?
- Do I need this?
- What would happen if I did not buy this today?
- Would I be any less if I did not purchase this item?
- Will I want this a week from now, a month from now, or forever?
- Will buying this, mean I won't have money for other necessities at the end of the month?
- Is this purchase important enough to sacrifice something else for?
- Is this a "need" or a "want?"
- Will I need to make payments on this item? And, more importantly, can I afford the interest?
- If I purchase this on credit, just exactly how much will it cost me in interest if I only make the minimum payment?
- If I purchase this on credit, just exactly how long will I be paying for this item?
- Can this be bought cheaper at another store?
Think before you spend what you don't really have. One good measuring stick for whether or not you should make an non-essential purchase is -- if you can't afford to pay cash for it right now -- you probably don't need it.
Credit Card Debt and Debt in America
- Depending upon which source you go to for statistics, the average American has between $8000 and $11,000 in credit card debt.
- What the statistics don't reveal, is that the above figure does not include loans for vehicles. This brings the average American debt at $18,700 per household.
- Even more shocking, is that this debt does not include mortgages.
Do I Need It or Do I Want It?
Now more than ever, many of us need to do our homework, throw out the old budget (assuming we even had one) and set up a better budget. We need to get real both with ourselves and the other members of our household, and have everyone on the same financial page.
Look over your new preliminary budget and if it does not cover your basic needs, including some modest savings, then you need to plan some drastic lifestyle overhauling.
In such uncertain financial times as we face today, it is more important than ever to pay your emergency savings fund first no matter how much you'd prefer to spend that money on something else.
Needs vs. Wants
How Many Of These Rationalities Apply To You?
1. I feel the need to keep a "certain" image.
2. I don't keep tabs on how much money I have or how much money I spend on a daily basis.
3. I spend money when I know I have a "windfall" amount of money due in soon.
4. I use credit, even when I have the cash for most purchases.
5. I want what I want, and when I see a bargain on what I want -- I can't resist buying now. I'll figure out how I can pay for it later.
6. I was poor as a child, that's why I spend too much.
7. The raise I just got, means I can afford to buy more.
8. Buying things I like, makes me feel good.
9. If I have certain "things" the world will know I'm worthy.
10. I can't say "no" to my kids, my spouse, my friends -- even through I really can't afford to say "yes."