Are you having a difficult time staying true to your lifestyle plan (budget)? Even with setting short-term and long-term goals, do you still feel that you are not in control of your finances? If so, this is an example of expecting a different outcome without changing your behavior, a loose definition for insanity. You must change your relationship with money or how you deal with money in order to make a difference with your finances. One way to help you change your behavior is to distinguish between your needs and wants. The difference between your needs and wants tends to become blurred but if you learn to distinguish between the two, you will start to see a change in your finances.
To start the process of distinguishing between your needs and wants, you must learn the definition of both terms. The definition of need is something necessary or essential for survival. Your needs are things that you must have to sustain you day to day. If you think of Maslow’s Hierarchy of Needs, your basic physiological needs are at the bottom of the pyramid and the needs become more complex as you move up the pyramid. With this in mind, your basic needs which are essential for survival, or things you are unable to live without should include food, water, shelter and clothing. Again, these are things that are necessary. On the other hand, the definition of want is something that you would like to have, something that you desire to have or something that is extra to have. For a simpler way to view the two terms, a need is essential to survive and a want is extra to live happier.
The difference between needs and wants starts to blur after your basic needs have been met. According to the Maslow’s Hierarchy of Needs pyramid, your needs become increasingly psychological and social once your physiological needs have been satisfied. As you move towards the psychological needs, your emotions become involved. Emotions are very powerful. They tend to take over and persuade your thinking and dictate your behavior. This explains why financial behavior is generally more emotional and reactive rather than rational and logical. This also explains why you struggle with your monthly lifestyle planning. Although you have important financial obligations, you struggle with your emotions and give in to what you desire and stray from what is best or logical.
In lifestyle planning, there are financial needs that are essential for your survival. These needs are expenses that are necessary for you to live and work. These are expenses that take up the majority of your income. The essential financial needs include:
Although these items cover the basic survival needs, the lines can still become blurred as your emotions get involved. Your emotions can start to perceive survival in a different way. For example, your basic need for food does not mean you need a rib eye steak and lobster for dinner every other night to survive. Your basic need for transportation does not mean trade in a working vehicle for a newer model. Your basic need for clothing does not mean designer outfits for every day of the week. This does not mean your lifestyle plan has to be bare minimum or without any extras. Just make sure the extras are understood as extras and not confused with thinking the extras are needed for survival.
After the essential financial needs are covered, all other expenses are considered as wants, which are things you desire or extras to live happier. These items include electronics, leisure travel, celebrations, girls/guys night out and entertainment such as movies, plays or sporting events. Even if you have significant income, the cost of your desires can negatively impact your lifestyle plan and prevent you from achieving your financial goals.
Our society has become filled with wants and desires. We have allowed advertising and social media to influence our way of thinking. We have become obsessed with the newest gadget or the latest fashions and we convince ourselves that it is fine to obtain more and more material possessions. The next time you are tempted by your desires, stop and ask yourself these questions:
Instead of feeding into your desires, take time out to appreciate what you already have accumulated. You will find that you have by far exceeded your basic needs in almost every area. By becoming aware of your behavior and learning to distinguish between your needs and wants, you will see a positive impact on your monthly lifestyle plan to help you reach your short-term and long-term financial goals.