“I admit that some have stumbled upon this blog post today who do need money for legitimate survival. But it is probably not you.”
– Joshua Becker
Although most parents try to teach their kids the difference between needs and wants, we adults aren’t always good at making the distinction ourselves.
How often have you said something like, “I need a new phone,” when the one you have works just fine? Maybe today you said “I need to go out for pizza,” or “I need a beer.” Clearly, these are wants, but in the moment, we feel they are needs.
Of course, most of us thinking about simplifying our lives aren’t living in the kind of poverty that requires defining a “need” as something literally required for survival, and doing so isn’t going to make our purchasing decisions any clearer.
After all, it’s a given that, by that definition, nearly all the money and time we spend will be on wants, not needs.
On the other hand, liberalizing the definition of “need” to cover everything we like and can easily afford isn’t going to help us make wise decisions about how to spend our time and money, either.
Obviously, we need a more workable distinction between needs and wants.
“Achieving clarity about the difference between our needs and wants remains one of the biggest challenges in personal finance and a tremendous source of potential conflict within families.”
– Carl Richards, The Struggle to Define What We Truly Need
One way to distinguish between needs and wants is to say needs are those things that enable us to support ourselves and our families in reasonable comfort.
In other words, most of us will consider work-appropriate clothing necessary. However, few of us will, even with this more lenient definition, need a designer suit. Instead, we can wear more modestly priced attire.
Similarly, unless you live in an area with good public transportation, you’ll probably consider some form of vehicle (e.g. a bike or car) necessary. This vehicle need not be a luxury car, but should safely get you to and from home, work, school, etc.
Going further, things that help us build and maintain good relationships, help others who are less fortunate, learn, and experience beauty can be considered needs as well.
In fact, some people¹ formally use Maslow’s hierarchy of needs when creating their budgets. You’ll almost always see Maslow’s hierarchy depicted as a pyramid.
At the bottom are biological needs, such as air, food, water, shelter, warmth, sex and sleep. At the top of the pyramid are needs for self-actualization (realizing your potential) and helping others to achieve self-actualization.
You’re probably not going to pull out a copy of the pyramid every time you consider buying something or adding an event to your calendar. At least I know I‘m not. But we can take some time to prioritize our values and use the results to distinguish between needs and wants.
By doing so, we’ll save time and money, as well as open ourselves to happier and more meaningful lives.