Managing Personal Finance: Needs vs Wants

[Etini]

When it comes to effective financial management, one of the core things to do is to differentiate between wants and needs. To make it clear, needs are those things that are necessary for life and survival. Without these things, life is likely impossible. These include food, clothes, healthcare etc. Wants on the other hand are those things we desire beyond our daily needs. These include entertainment, luxury items, vacations etc.

In order to manage finances properly, a person has to identify the expenses that are needs and wants. Suffice it to say that what might be wants and needs for us might be different according to our different affiliations, creed and endeavours. For instance as an online worker that I am, expenses on data is a need for me. And I have to prioritize it. But is it a need for someone who works as a nurse in a hospital? It is obviously not. And spendings on it should be minimized.

The key to financial management as it relates with wants and needs is to list everything you spend your income on. Categorize them realistically into wants and needs. Then, you prioritize spendings on needs and reduce expenses on wants. This is essential in financial management as it would help an individual to avoid overspending and debts. So you could ask yourself if that Christian Louis Vuitton shoe is a want or a need? For me, it would be a want. For a model or an artiste, it is a need because they have to wear designers for their jobs.

 

[Imran Noori]

Managing personal finance is directly related with expenses, if you want to have a finance then you should decrease your expenses.

When you want to manage your finances, you should give priority to needs because they are necessary factors of our lives, after that if you had extra money then you can use it for your wants.

Buying luxury is the biggest waste of money that someone could do, there is no need to buy a new version of a mobile phone when you already have the previous version of it.

 

[saoussen57651]

People merge between needs and wants as sometimes wants for them are labelled as needs that let them run fast out of funds and go to debt with interest that increases such a problem for them.

 

[marym]

Great points! Understanding the difference between wants and needs is crucial for effective financial management. As you mentioned, it's important to identify what expenses are necessary for survival and which are merely desires or luxuries.
Creating a budget that prioritizes spending on needs and reduces expenses on wants is a smart way to manage finances. It helps individuals avoid overspending and accumulating debt, which can cause financial stress and negatively impact their overall well-being.
It's also important to note that what constitutes a need or want may vary depending on a person's lifestyle, occupation, and individual circumstances. For example, as you mentioned, expenses on data might be a need for an online worker but not for someone working in a different industry. So it's important to evaluate expenses on a case-by-case basis and make decisions based on individual needs and priorities.
Ultimately, being mindful of spending habits and prioritizing needs over wants can go a long way in achieving financial stability and reaching financial goals.

 

[Etini]

Great points! Understanding the difference between wants and needs is crucial for effective financial management. As you mentioned, it's important to identify what expenses are necessary for survival and which are merely desires or luxuries.
Creating a budget that prioritizes spending on needs and reduces expenses on wants is a smart way to manage finances. It helps individuals avoid overspending and accumulating debt, which can cause financial stress and negatively impact their overall well-being.
It's also important to note that what constitutes a need or want may vary depending on a person's lifestyle, occupation, and individual circumstances. For example, as you mentioned, expenses on data might be a need for an online worker but not for someone working in a different industry. So it's important to evaluate expenses on a case-by-case basis and make decisions based on individual needs and priorities.
Ultimately, being mindful of spending habits and prioritizing needs over wants can go a long way in achieving financial stability and reaching financial goals.

Thanks for this beautiful response. Indeed, we just make our lives harder by spending excessively on wants. Not as if we shouldn't enjoy life, we should understand our financial levels and what we can enjoy at that level.

And you know what, when you spend so much on wants, you would get in debts because you don't have any option but to meet your needs. There is no option to eating and it would be either Yiu borrow to eat or eat on credit. The expenses that a person has an option to avoid is wants but sometimes we are pressured to prioritize our wants.

 

[moonchild]

knowing the difference between wants and needs is very important if you want to take control of your finances, but i think that is just one part of the problem, I used to think about this too like okay, if I buy only what I need and ignore my wants, I'll be good but then I realised that I am just saving and living frugally which to me is just existing and not living.

I realized my main problem is cash flow, I don't make enough money that is why, if one can make say a 5k dollars a month who cares if you save on eating out or not buying that three piece suit you really like.