Sorting Wants from Needs : Willeke Financial Group, LLC | Lincoln, NE

Sorting Wants from Needs

We all have needs in life. The biggest include food, clothing, shelter, access to medical care, and electricity for the home. Few people can live successfully without these things (although plenty have tried, and some do so). So, we accept these as needs rather than wants, though we also want them. This is an important distinction; it helps us see what we should value and how we should pay for it, and what we should pay to obtain it.

And it brings us to our other category: wants.

Wants are things like vacations, nice cars, a new house or a watch, designer clothing, shopping trips and the latest electronic device that is simply cool but is not needed to achieve a normal life. There is no doubt about it: wants are a lot more fun than needs. Paying for water and food or shelter is often boring, boilerplate. But buying a new game for PS5 or taking a spontaneous trip to Hawaii is way cooler, and we lovingly labor over the details of the latter while often ignoring the former.

What gives?

We’re naturally fun-seeking creatures. We like to explore, try new things, acquire nice things, flaunt them, gain social status, and overall just please the dopamine and pleasure centers of our brains. And really, there’s nothing wrong with that! We should enjoy ourselves and our lives, and we shouldn’t feel guilty about spending to achieve a higher level of happiness than we’d otherwise have. When we budget properly, this isn’t a problem at all.

The problem comes when we incorrectly gauge wants and needs and when we lose stock of one in favor of the other. More specifically, many of us are guilty of letting needs go on the backburner while we instead pay for wants, many of them frivolous. I’ve done it, you’ve done it, everyone’s done it at some point. Some people make a habit out of it, others are more ascetic and don’t have a problem with it. While there is variance in our levels of wants versus needs, we can all benefit from smart budgeting and learning how to properly decipher one from the other better.

First and foremost, if you have any sort of debt, it’ll be imperative to pay that off first, especially the debt with the highest interest (APR) rates. This debt can constantly accrue more money owed and significantly slow you down from achieving the things you want. Many people find paying off debt, be it for credit cards or schooling, to be boring, stultifying, and sometimes defeating. The amounts can be massive; the end goal can look hopeless. We can placate our unhappiness by buying something fun, a little bit of retail therapy.

While this is a natural impulse, it’s also one that would be better served by some caution and delicate spending in accordance with a budget. Psychologically speaking, the dopamine we get from buying something to feel better is a brief but fleeting high. Our overall long-term mental health is better served by allocating more money to pay down that debt and work towards a freer, less constrained financial life. This falls under long-term gain versus short-term rewards, a classic problem.

Long-term gains serve us, well, in the long term. Paying off debt, working on a degree, settling into a career and working upward, and taking care of our physical health are all long-term potential gains. They’ll take years, possibly decades to reap rewards from, but those rewards are potentially massive, difficult to quantify as simple numbers. They can be measured as real achievements that last for even longer than the time it took to earn them, though we often struggle with such timeframes. We prefer quicker turnarounds, or short-term rewards.

Retail therapy and going shopping for things we don’t need to make ourselves feel better or distract from our other financial problems is the definition of short-term reward. It simply feels good. It does its purpose right then and is quickly forgotten once the brain chemicals wear off, but the problems remain, and now we have less money with which to fix the problem. In fact, after the high is worn off, we might find we even feel worse than we did before. We might inch toward despair at our goals being distant.

To avoid this disparity, it’s vital to learn to differentiate wants and needs. Needs are the things we literally cannot live without. The ones discussed above are the most common, but some others might include specific medical issues or prescriptions, maintaining a job, a working telephone or internet connection, things that we realistically need to function and survive in the world. For example, an ability to reliably call someone is a need; having the latest iPhone to do it is a want. For most people in the modern world, a computer is a necessity. So much of our work and our lives are bound up in them. A computer is needed, but the latest and coolest rig souped up with absolutely everything is a want.

Modern needs include:

  • Food
  • Shelter
  • Clothing
  • Gas
  • Heat
  • Clean water
  • Access to medical care
  • Electricity for our core appliances (telephones, computers, etc.)
  • Insurance
  • Transportation

Some of the trouble can come from the gray areas of classification. Many of us consider love a need in the world, or at least companionship. It speaks to our psychological needs of expression with another human being. So how do we balance a very human need with realistic modern life? If we need companionship, do we also want love? Do we attach specific ideals to it, such as fancier dates and gifts, or do we remain minimalist, needing only the emotion but wanting the other things with it? This can be tricky. There might not be a distinct tried-and-true answer. It’ll vary from individual to individual, and a big part of it comes down to budgeting.

Common wants include:

  • Fancy new appliances or electronics
  • Designer clothing
  • Jewelry
  • Vacations
  • New cars
  • Many home renovations
  • Boats, alternative vehicles, etc.
  • The latest and greatest anything
  • Keeping up with the Joneses

All of us need some form of leisure or pleasure in our lives, and recreational spending forms a core part of that. When we budget properly, we can still give ourselves our wants while caring for our needs. It would be ridiculous to suggest never spending on wants until all bills are paid, all social and debt obligations fulfilled, all tasks done. This can take decades. But when we budget around those things and make responsible space for them, we can find ways to have both, balancing the long-term rewards and the short-term gains.

If we have trouble separating the two, making an Excel sheet of the different wants and needs is a great place to start. This helps you keep on track and remember what matters the most for your spending. It also helps you directly budget for each thing so you can easily weigh cost allocations and the rate of money flow. You can keep a tally of what you’ve spent and on what, and create a monthly chart showing percentages of want spending versus need spending. This technique can help you directly visualize your money and where it’s going. Sometimes just looking at something in a different way is all it takes to get back on track.

If you find you have genuine trouble separating wants and needs, or you struggle with allocations for it, a financial advisor or planner can help alleviate some of the stress by offering advice as an objective third-party. They can also help you break down your spending and show you how you can achieve better financial freedom and more of your long-term goals by simply spending differently or charting your money in different ways. If you struggle with budgeting, there’s no better time than now to get better at it.

Whether you want to one day own your own island or you’d simply be happy having no more debt, there’s a place for clearly identifying wants and needs and budgeting accordingly for each. My experience has been that everyone has it in their grasp to sort out their wants and needs and live a more satisfying financial life with just a few key simple changes. It only takes a couple steps to put yourself on the right track, and that track can serve you well for the rest of your life.

Willeke Financial Group and its employees, NYLIFE Securities LLC, Eagle Strategies LLC and their affiliates do not offer tax or accounting advice. Please consult your own legal, tax or accounting professionals before making any decisions.