Friday, May 27, 2016

Needs Vs. Wants

I'll admit it. I want that car. It is fast, good looking, and a legend. I could buy it. It may be a little tight, but I could make it swing. But the real question is: Do I need it?

A common stress point for budgets are deciding if a purchase is a need, or a want. In the heat of the moment, a want can seem incredibly similar to a need. I have been playing with a set of guidelines that help me distinguish between a need and a want.

1. Is this purchase a replacement (need), or an upgrade(want)?

If I am purchasing a new pair of shoes because my old pair is worn out, and no longer functional, then it is a replacement, or need. If I am buying another pair of shoes, cause the old ones don't look new anymore, then it is an upgrade, or want. This applies to large purchases as well, such as cars. If I am selling my current 3 year old car because the newer model is better, then it is an upgrade, or want.

2. Do I own any existing alternatives?

If you have something that does the job (car, shoes, clothes, etc) take care of it, and get your money's worth! Each time you replace something, you are spending money that could be working for you, and letting that Yap-yap dog run amuck in your living room. Then he poops on your rug, and you reward him with a milk bone. It may feel restrictive, but you need rules for your money or it wont work for you.

3. Will I still "need" this in 24-48 hours?

This is a popular test to help decide if you really need something. Unless you are Rain Man, you probably don't perseverate on everything you want. Sooner or later, you will forget about that new shiny purchase, and focus on your true needs and the problems that currently present themselves. It can't be a compulsive buy if you wait a day or two before purchasing.

4.  Will this make me happier than achieving my goal (i.e. 10 year retirement)?

I use this question the most. I want to have freedom of time and choose what I work on each day. I want that freedom so much more than I want a new car, no matter how fast or sleek it is. It doesn't matter that I can afford it, because I want freedom and total control over my time infinitely more. 

What do you want? What is your ideal day-to-day life? How could learning how to say no* help you achieve your goals?

*This post is by James Clear, one of my favorite writers. The post is specifically about saying no to achieve health goals, but I believe the principles can be transferred to any area of life: financial, social, educational, etc.

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