Looking back on my college days, I recall what may seem like an odd memory – the distinct sense of pride and satisfaction I felt when paying my own bills. For the first time I was really independent and able to provide for my basic needs. I seldom made a distinction between a need and a want when spending money. While the difference between them may seem obvious, actually recognizing it is an incredibly important step in gaining satisfaction from our money. Do most of us even think about it?
In her book, Financial Recovery, Karen McCall sets forth the comparison this way:
"A need, when filled, sustains us.
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A want, when filled, entertains us.
Attempting to substitute wants for needs eventually drains us."
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McCall goes on to say that a "need is best defined by the person who feels it." One person's want may be another person's need. Learning to differentiate between them is the key. If we focus solely on meeting needs, doesn't this suggest a life of deprivation, with little enjoyment or fun? After all, isn't it the "wants" that really make life interesting?
The truth of the matter is that there is always something more we could want. This very fact in itself suggests that the underlying nature of our spending on wants may reveal a certain emotional poverty. Think of people who spend a lot on wants (luxuries, non-essential or non-functional items) and yet are still strangely dissatisfied (even Mick Jagger couldn't get anysatisfaction!)
People may charge their way to unhappiness, leading to debt and guilt. Shopping in order to feel better or to improve one's sense of self-worth is an activity motivated by emotional needs that cannot be satisfied by spending money.
Recently, I got a new pair of glasses. It had been more years than I care to count since I'd had my eyes checked. I kept putting it off, reminding myself how expensive glasses can be and thinking about all the other things there were to spend money on. But now that I've gotten the glasses, I am kicking myself for not doing it sooner! Those freeway signs were not supposed to be blurry! It turns out there is great satisfaction in meeting a very basic need.
This anecdote illustrates the opposite side of the spending "coin" – someone like me, a saver, who can often have a difficult time spending money and being able to enjoy it.
The bottom line, whether you tend to spend on wants at the expense of needs, or are a reluctant spender, is to have a dialog with yourself when you are contemplating a purchase. Ask yourself these questions:
Do I need this item now? If it is an impulse purchase, it's very likely a want. At first the glasses didn't seem like that much of a need, but (in hindsight!) I was ignoring the signs of impaired vision that should have clued me in to the true necessity of the glasses.
Do I need this particular item or service? And finally, what do I have to give up if I choose to buy this? You may have to forego something else in order to have what you want or need. Again, bottom line – we can't have everything and money is (for most of us) a finite resource.
Being in touch with our actual needs versus wants allows us to be more conscious about our spending. We are more likely to make skillful and informed choices about the use of the money we have. This, in the long run, yields greater satisfaction from money. There is a basic sense of gratification in the knowledge that we are taking good care of ourselves. It is an acknowledgement of our worth. Being clear about the difference between our wants and our needs isn't just a matter of survival. It is also about being in touch with what is most important to us. I think I understood this during my college days – and, like many of us, I just needed a refresher course.
Jeff Stoffer CFA, CFP®
Stoffer Wealth Advisors
www.stofferwealthadvisors.com
415-706-7800
