Everybody wants to retire rich when we get older. To do so, we have to save up quite a bit or as one of my friends puts it, put together a really big golden goose. The trick to investing, saving money, and reaching your financial goals is to make sure you’re wisely balancing your long-term needs and your short-term wants to allow you live well, but frugally, and find joy and contentment in life. There is no formula for that as only you can determine which trade-offs you are willing to make
The difference between a need and a want is pretty simple—until you set yourself loose in a store. Double chocolate chip ice cream? It’s a food, so mark it as a need. That designer T-shirt that fits you perfectly? Well, you need more shirts, so why shouldn’t it count as a need, too. It’s easy to mix up wants and needs, break your budget, and lose sight of your goal to live frugally.
The difference between wants and needs is quite simple, at least on the surface:
Need: something you have to have
Want: something you would like to have
Tally up the damage caused by a few justifications like those mentioned previously, and suddenly you’ve spent far more than you intended. What’s the solution? Start with an understanding of what a need really is and when something is a want.
In actuality, you only need four things to survive:
- A roof over your head
- Enough food and water to maintain your health
- Basic health care and hygiene products
- Clothing (just what you need to remain comfortable and appropriately dressed)
Everything that goes beyond this—a big house, name-brand clothes, fancy foods and drinks, and a new car—is a want. The comparison chart below provides a good explanation of the differences.
|BASIS FOR COMPARISON||NEEDS||WANTS|
|Meaning||Needs refers to an individual’s basic requirement that must be fulfilled, in order to survive.||Wants are described as the goods and services, which an individual like to have, as a part of his caprices.|
|What is it?||Something you must have.||Something you wish to have.|
|Change||May remain constant over time.||May change over time.|
|Non-fulfillment||May result in onset of disease or even death.||May result in disappointment.|
Does that mean that you should only buy the things that you need? Not at all. Life is meant to be lived, not survived. Treat yourself to some wants along the way, but do so when you can afford to, and enjoy those wants as the extras that they are.
Once you become better at differentiating between wants and needs, you’ll probably see that you’ve been able to fulfill more of your wants over the years than you realized. And that can be a major turning point. When you find things that you want to buy or do that you currently can’t afford, it becomes all too easy to focus on those things to the point of overlooking all the many possessions that you do have. Don’t trick yourself into feeling deprived when you aren’t.
Take time to reflect on all the ways that you’ve been blessed. Then, decide what’s really important to you, and go after it. So many people talk about wanting to do this or that, but they never actually try to make it happen. Be the person who makes it happen.
So if you want that golden goose to enjoy in the later years, come up with a plan, and act on it. Even if it takes you a really long time, just working toward a goal is empowering. It makes you feel capable, instead of deprived; it makes it easier to tune out all those things you don’t need , and it puts you in charge of your where you’ll go next. Use a financial goals worksheet to note your goals on paper. Then, learn how to fit your big dreams into a small budget.
The above question sounds simple but as usual, theory in practice is challenging. Good luck.