Some people would be confused and may not be able to distinguish the difference between Needs and Wants. In my opinion, differentiating between the two is the most important first step to form a great habit to be rich. Here is how I see it.
Needs– this is something you must have, something you can’t survive without. The best example would be food. If you don’t eat food, you wouldn’t survive.
- Food- Not restaurant meals or dining outs but home cooked meals, drinkable water, vegetables, fruits etc…
- Clothing to warm you up and cover your body
- Shelter- whether you rented or not, you need a place to keep you safe
- Utilities such as water, heat, electricity
- Transportation- Car, public transportation
Wants-this is something you like to have. Well let me put it this way. This is everything else other than Needs
Let me walk you through the following examples.
- Takeout coffees every morning- $5 (Wants– Make it Needs by taking coffee from home. Saving $4.75)
- Eating out lunch- $12 (Wants– Brownbag your lunch. It is definitely healthier and cheaper. Saving of $7)
- Smartphone plan- $80-$100 (Wants– Why would you need $2GB of data plan on your phone? To watch Youtube videos? Get the 200-400mb internet plan which will be sufficient for all your internet needs such as basic internet surfing, checking emails, navigation etc… other than watching videos, Try to utilize public wifi- Saving of $30-$60)
- Snacking out- $5- $10 (Wants– Pack your 200ml orange juice and individually packaged cookies and chips from home. Saving of $5-$8)
- Luxury anything- bags, clothing, shoes, cars etc- $500- $100,000 (Wants-Don’t be ridiculous. You don’t need them. If you are decent, you don’t need to decorate yourself with luxury stuff to make you look dumber. Don’t you want to have money in your bank that works 24/7 to make you richer? Or you really want show off to people around you and make you poorer everyday?
- Car?- If you can take public transportation and have no kids then not having a car is one of the best way to save money. Monthly estimated cost is $50 for maintenance, $150 for gas, $200 for insurance, car payment of $250 per month. Total of $650/month vs $150/ month of public transportation.
Always ask yourself before impulsively buying anything. “Do I need it? Or just want it for my pleasure?” Trust me, forming the right habit will save you $200-$500 per month which will make you a millionaire if you invest the money in safe/good quality stocks or ETFs.
As I am a human being and I would be hypocritical if I say I don’t fulfill any of my Wants. I do have a smartphone, car, TV etc… but the important takeaways from here is that you should set your priorities straight and only pay for the Wants that matter to you. Once you form the good habit, then you could see yourself having a full control over your spending sprees on Wants that you did not know about.
Buy the Wants that are important to you. Really really important!
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Good and useful post. Never thought Need vs Want to be important until now.
Thanks Brian. The key is to be rich steady and slowly.
tricky, how would you consider it every time you buy something?
I don’t think about it all the time but I habitualized. It really works within a couple of months of trying.