Do you know the difference between your needs and wants?

Spending can often be seen as a tension between “needs” and “wants”, but aside from a few exceptions everything is a “want”. And that’s okay.

“I need it!”

We’ve all said this when it comes to spending money.

But do we really?

Many of us have a built-in hierarchy of importance when it comes to spending money. As an example, we tend to put eating at restaurants pretty low down on the list, given how often I hear clients say that they “should make dinner at home more” and that they “don’t need to go out as much” as they do.

While I think these biases are largely unexamined, I think it’s natural to have some kind of hierarchy of your spending. Not everything is equally important.

The problem comes in when you describe some of your spending as “needs” and others as “wants”.

Because, actually, pretty much everything you spend is a “want” and not a “need”.

What is a “need”

Let’s go back to basic principles here.

The word “need” implies a requirement or obligation. This must happen.

Many things feel like a need. But what really are your needs, when it comes to your spending?

Here is the list that comes most readily to mind:

  • Food/water: You have to eat and drink to live. This one should be straightforward.
  • Shelter: Some kind of safe protection from the elements is a requirement for living.
  • Utilities: Having shelter isn’t quite enough. You need to keep the lights on and the air conditioner/heater going.
  • Clothing: You have to be able to clothe yourself properly.
  • Transportation: Mobility is empowerment. If you can’t get where you need to go, you won’t be able to get there. Some might say this is optional, but I’m not so sure.

What is a “want”

Everything else not on the above list is a “want”. Everything. Really.

And that includes upgrades to the above too:

  • Food is a need, but dinner at the French Laundry, or even at Domino’s, is a want.
  • Shelter is a need, but a nice Craftsman with two bedrooms, two baths and a wraparound porch is a want.
  • Utilities are a need, but central air is not.
  • Transportation is a need, but a brand new car is not.

You get the idea.

“Wants” are okay

Now, don’t misunderstand me. I am by no means saying that you should buy the bare minimum to cover your needs and not spend any more than that. I want you to spend money on what you love! This whole austere, minimalist-living stuff is for monks only.

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What I’m trying to do is to help you break out of a mindset that some spending is “bad” or less important because it’s a “want”, while other spending is more important because it’s a “need”.

Look at your spending right now. (Hopefully you’re tracking your spending and not just looking online, but that’ll do in a pinch.) Pretty much 100% of your spending is optional. They are “wants”.

But that’s okay! Wants are perfectly fine, good even. Spending isn’t good or bad, and spending more isn’t bad and spending less isn’t good. (Or vice versa, for that matter.)

What’s most important is to figure out what kind of spending is in line with your values? What kind of spending gets you to your goals?

We have all kinds of demands on our money, and spending is often a tension between the present and the future. That means that all of it needs to be taken into account, even the “fun” stuff too.

It’s not easy to figure out the question, “what should I spend money on?”. But one thing is for sure: whatever you’re going to spend money on, most of it are things you don’t need. And that’s okay.

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