Wants and needs. The debate is not that one should not have any wants, but that how do we balance our wants and needs. These are simple words, wants and needs. However, what they signify are facets of our lives that can greatly impact financial and emotional outcomes.
A need is what we require to sustain our life in our chosen location or community. This is a bit more than just what we need to survive. Survival can happen with just food, water, a set of clothes and shelter. However, living in a community, in society, requires a lot more. There are expenses on basics like electricity, fuel and transportation on the one hand. Plus, there is expenditure on things like school fees, essential apparel, items at home and some amount of entertainment on the other hand. Some of these are non-negotiable and others can be more flexible costs, nevertheless, these are all needs of the day.
Contrast this with your wants. Wants are desires to buy things that have no fundamental requirement in sustaining our lives. These are like frills which we add on to keep up a particular lifestyle. Toys, clothes, shoes, gadgets, expensive bottles of wine and so on. Nothing wrong with wants, just that they require a lot more monitoring than expenses on needs. Wants can get out of hand, especially when it’s not just about our lifestyle, but also about keeping up the show in matching another’s lifestyle. Wants can be tricky if you don’t value the last purchase and as soon as the next best thing is launched, jump in to buy that.
Moreover, the proportion we spend on a few wants can sometimes cover many needs.
Hence, one has to watch out for this aspect of our lifestyle.
Defining a need or a want
At times the lines get blurred between what is a need and what is a want. Children have been attending school from home, now for more than a year. Is it a want or a need to buy a Rs 50,000 worth laptop for your child when there is an older one at home, albeit with a slower processor? Is it a want or a need to buy an iPad instead? Is it a want or a need to buy ear pods instead of headphones or more than two pairs of headphones? Walking on this invisible line between needs and wants can be really hard to balance.
Some other things can be easily identifiable as a need or a want, like a branded handbag is clearly a want but a basic wallet to carry money is a need. Internet broadband has now become a need, but subscribing to OTT content that uses this broadband may be a want. Are you subscribing to one OTT platform, two maybe or five? At what stage does a need turn into a want?
Ensure that the wants you do spend on are the ones that bring you joy, rather than something you are buying to show others around you or just out of boredom.
Both emotional and financial values are important. If you can identify an item clearly as a want, it doesn’t automatically mean you shouldn’t own it. Our lives are made up of both wants and needs. However, do a quick check on what proportion of your monthly or annual spend is on wants as opposed to needs. Ideally, wants should not be more than 50% of your needs in monetary terms and perhaps just about 20%-30% of your income. Scale down your monetary value of wants if this proportion goes awry too often. When you start exceeding a manageable and affordable threshold on spending on wants, you start to fall short of money. This is a classic invitation to adding debt, debt is fine in some cases where it is long term and linked to assets, but when we start borrowing to satisfy our day to day wants, a pile-up of high-interest debt is not far away.
If a want has a high emotional value or sentimental value, then you can plan its purchase rather than being impulsive. Save up for a few months for such expenditures.
Managing your needs and wants in this day and age of consumerism is not easy, in fact, it can be a very daunting task. However, it is crucial to be even more alert around it because, unless you identify your wants clearly and manage what you spend on them, you can land up with a debt burden that is hard to manage. Debt can create a lot of financial and emotional instability.