How To Understand The Difference Between Budget “Needs” And “Wants”
Living without roommates is both exciting and terrifying. The idea of only having to listen to yourself is invigorating. However, when the reality of living alone sinks in, and you truly realize what it means to be left with all the expenses to pay for, it can be overwhelming. I recently assessed my finances to see where my money was going, in order to get a better understanding of my spending habits. I wanted to start taking more control, and building a better safety net for myself moving forward. I know that in order to do that, I had to understand where I could begin to cut back.
I was forced to look at my finances from a different perspective, and I needed to address what purchases were made to satisfy my needs vs my wants. To me, an expense that is needed is one that is essential to ones life — without it, they wouldn’t be able to survive. This may seem obvious to everyone, but when I considered my own spending habits I realized how blurred the line is in deciphering between my needs and wants.
My initial realization of how often I was splurging on want items was shocking. I became aware of how often my frivolous spending was making me ignore the very important distinction between what I wanted and what I needed. For example, the fancy dress hanging in my closet wasn’t nearly worth the money I paid for it (and has yet to be worn), and is clearly a want item. I had to learn that if I really wanted to live alone it would mean that I would have to stop making these kinds of purchases if I wanted to build myself a proper safety net. This process forced me to look inward to find out why I wasn’t in control of my wallet, and what I could do to change that.
I discovered that I was distracted by my desire for things that were just aesthetically pleasing, and I spent money on them without ever considering whether they were practical or not. I tied my happiness too closely to what I could buy. While it is nice to be surrounded by things you find beautiful, you need to be aware of the quantity of how much you’re buying — something I hardly considered when I was shopping. I was doing a poor job of managing my finances, and I had almost no budget to speak of.
Once I reviewed my finances more closely, I found pages and pages of bank statements full of coffee, dinners, drinks, clothes, and shoes. These items were all purchased without much consideration of what was really worth the splurge and what wasn’t. I was simply shopping on a whim. Looking back on it, it seems that I was feeding a cycle of unconscious mindless spending. I was shopping for clothes when I had a perfectly good selection of tops and skirts in my closet to choose from, when I could have been putting that money away for a better use.
It became clear that my impulse purchases were destroying my finances. I wasn’t budgeting or planning to save, and I knew I needed to make a change if I was ever going to build myself a reliable safety net to use as an emergency fund.
Over the past month, I’ve been sticking to my budget, and I’ve learned that the process doesn’t have to be all or nothing. It’s important to make little changes that produce real results over time, instead of trying to over save and then failing. Having patience and practicing balance in terms of saving and spending is crucial to sticking to a long-term financial plan. Understanding my purchasing behavior and taking a hard look at what I was doing wrong has helped me infinitely. I found that a lot of purchases were easier to cut out than others. I thought, did I really need to pick up a coffee on the way to work? No. The office coffee (with enough milk and sugar) will slide down just as easily as the $5.00 latte. Now, I want to take that money and put it toward something much more useful.
Examining my wants and needs really changed the way I spend. I have become more in control of my wallet and of my finances. The things I want have become more of an actual long-term reward rather than an impulse purchase. I now treat the want items with much more care and consideration, and I feel much more in control of my emotions being tied to my spending. I’ve learned that when you control the immediate impulse of a want purchase, you can save up more easily for things that provide more long-term satisfaction like vacations and travel.
Without the distraction of purchasing material items, I have become more focused on the intangible aspects of my life, like my professional career and personal goals. It feels good to refocus on the things that truly deserve my attention rather than on the distractions that caused me to lose sight of what really matters.
In a world that is driven by impulses and short-lived desires, I feel like it’s crucial to determine the difference between wants and needs, and understand how to balance my personal finances. I am able to grasp the difference between a short-lived desire and a long-term investment. I have also learned that these impulse purchases aren’t going to make me prettier, funnier, or smarter, and they have lost some of their pull on me as a result. In doing this exercise, I’ve been able to disconnect the correlation between my confidence and my purchases. Now, I’m able to see that my confidence is built by investing in activities, goals, and dreams that benefit me, and don’t chip away at my financial health.
Now that I have a more balanced financial outlook, I find myself more satisfied in all other aspects of my life. The old me used to accumulate stuff, because I wanted to be surrounded by items, but I didn’t realize they were weighing me down rather than building me up. I wasn’t addressing the underlying cause of why I felt the need to distract myself with mindless shopping in the first place. Now that I’ve taken time to evaluate what my priorities are and what matters the most to me moving forward, I can exercise greater control over my financial life. During this process I became aware that as a human being, I am worth way more than what I’m able to buy.