Australia’s credit card debt is a staggering $32, 000, 000, 0000 and climbing! That’s $32 billion for those of you, like me, who have no idea how many zeros that equates to. That figure is just scary!
How much of this figure do you think is actual ‘needs’ ? I’m betting not a lot of it. Wants vs needs is a mental and emotional struggle that all of us deal with. Some of us deal with it better than others. Anyone that is on a debt free journey definitely needs to be able to differentiate between these in an effort to combat further spending.
Wants versus needs will always play a role in our spending, but we have to learn how to control this so that we can make better financial decisions. Emotional buying is something I have struggled with myself. I constantly spent money on clothing, decor etc that I definitely did not need. When I was sad, bored, or angry, I would go purchase something to fulfill my need at that time.
The difference between needs and wants
If this feels a little ‘primary school’ feel free to skip ahead.
‘Needs’ are expenditures that are essential for you to be able to live and work. They’re the recurring expenses that usually take up a large chunk of your pay — e.g mortgage payment, rent, food.
Some common expenses that fall under needs:
- Gas and electricity
‘Wants’ are the things that help you enjoy life. They’re the things you buy for fun or leisure. You could live without them, but YOLO, kidding. They are the things that make life more fun and enjoyable. We can’t spend life never spending any money!
Wants include things such as:
- Designer clothing
- Gym memberships
These categories are pretty standard, but they won’t be the same for everyone.
How to understand what is a ‘want’ and reduce your spending
I came across this saying while researching this topic.
A need, when filled sustains you.
A want, when filled will entertain you.
Substituting wants for needs will eventually drain you.
Your deepest needs can’t be met with a pair of new shoes. Sorry!
Our need for love, laughter, touch, friendship, and physical connections, can’t be satisfied with new clothes. Making a purchase as a substitute for fulfilling a need, may satisfy you in the short term, but eventually you’ll either feel guilty or sad and the cycle will begin again.
When I think of a want, I think that if I buy it I will be immediately satisfied. A sudden urge to buy something – impulse buying, means it’s probably a want and not a need.
By slowing down, asking yourself some questions and understanding if that item is actually a need or want, you’ll be able to reduce the impulse buys that often contribute to spending problems and our debts.
Next time you’re out shopping ask yourself these questions before you make a purchase:
- Do I really need this?
- If I waited a week, a month or a year would I really still need this?
- Can I get this item cheaper, 2nd hand?
- Can I use something else I already own?
- How am I feeling right now?
- Am I trying to satisfy an emotional need?
- How many hours of my salary will this cost me?
- Can I borrow this item from a friend?
Writing down the item in a notepad and sleeping on it, not literally, can help you decide if it’s really a necessity. If a few weeks later you are still thinking about that item you can make a more conscious decision to purchase it knowing that it’s not on impulse. When you are getting ready to buy, always do your research and see if you can get an item cheaper, on sale or 2nd hand as well to help with the cost.
We all need to have a little bit of fun in life so budget in a little bit of ‘fun money’ every pay so that you stay sane, but remember the reasons why you are buying things and make sure they align with your goals.
I’d love to know – What’s a purchase you bought and now regret?