Financial Tips

How to Save Money : Wants vs. Needs in Household Budgeting

When our children are babies, part of how we teach them to communicate is through asking them what they want or what they like. And, they learn quickly! By the time they're toddlers, they've thrown temper tantrums when they do not get their way.

In time, children grow into kids and teenagers who are quite sure of the material possessions they want. This naturally continues into adulthood. In brief, it's perfectly natural to have material desires. Whether it's a new television, computer, outdoor grill, or a fancy camera-phone, there are hundreds of millions of people just like you in the U.S. alone.

The trouble begins when we can no longer tell the difference between the goods and services we want and those that we need. So, let's look at some definitions:

• Needs: Those things you require in order to stay alive and healthy. Basic food, shelter, and clothing would certainly fall into this category.
• Wants: Things you would like to have, such as conveniences and luxuries.

It's important to distinguish between the basics and the luxuries. If "food, shelter, and clothing" are needs, then gourmet food, housing in affluent or trendy areas, and designer clothing would be great examples of wants. Other items that fall into this category are entertainment expenses, excessive automotive expenses, cell phones, electronics, computers, new furniture, hobbies, and expensive toys.

In general, wants are those things that we purchase:

• impulsively (i.e., an item or service that you had not planned to buy upon leaving your home),
• after exposure to advertising,
• to make us feel happier,
• to impress others,
• to make others happy,
• because we've seen others with one,
• because we like the brand name,
• to upgrade our existing item in your home (especially when the existing item still functions properly), or,
• because it's a good value for the price (e.g., a sale item)

If this describes your reasoning, don't feel bad. It's human nature to make purchases for these reasons. And many of them are quite noble as well. For example, purchasing a gift to cheer up a friend is an admirable thought. However, if you're having trouble keeping your household budget in check, we advise that you take a moment prior to purchasing the item for some additional considerations. For example:

• Do I really need this item? Is this purchase truly necessary?
• Will purchasing this item negatively affect my household budget this month?
• Will I need to make payments on this item? Can I afford the interest?
• Will this item be available in the future for a better price? Can I wait?
• Is there some way for me to get this cheaper? This question may be especially important for impulsive purchases. Often, alternatives exist. For example, perhaps you could purchase the item used or at another store. (Always shop around when possible!) Additionally, you could search online for a better price on a new or used model.

Remember: Our focus here is on helping you maintain a healthy household budget and manage your debt responsibly. If doing so is causing difficulty in your life, give Credit Counselors a call. We've helped more than one million individuals and families take control of their financial situations.