ICFE eNEWS #13-11 - Oct 1st 2013
5 Questions To Ask To Identify Wants From Need
By Jim Garnett, a/k/a Ask Mr.G, a member of the ICFE's Board of Educational Advisors.
In our last discussion about "Wants Vs. Needs" we listed 5 beliefs that encourage the perception that many of our wants are needs: (1) If I can get it, (2) If I deserve it, (3) If it makes me look more important in the eyes of others, (4) If I am accustomed to having it, and (5) If it is a good bargain. Those beliefs will result in us labeling almost everything as a need instead of a want. Here are 5 questions to ask that will help determine whether the desired item is a want or a need.
1. What will happen if I don't buy this? There are usually serious repercussions to not meeting our needs. On the other hand, there are usually few repercussions to not meeting our wants.
So, to help determine a want from a need, ask yourself "What will happen if I do not purchase this? What hardships will be created? Are safety and protection an issue? Will anyone be put in jeopardy?"
The answer to this question does not necessarily determine if you should buy something or not, but it does help you sort out if it is a want or a need.
2. If I wait for several days, will I still be so passionate about buying this? Have you ever purchased something on a vacation trip out of impulse? After a few days you begin to like the cowboy hats that these people in Arizona are wearing. So, you buy yourself a Stetson and proudly wear it for the rest of your vacation. Unfortunately, when you get back home to Minnesota, your Stetson looks completely out of place, so you place it on Craigslist. This is the sad result of impulse buying.
This is also a real danger at the checkout counters. A recent survey by The Checkout revealed that 9 out of 10 shoppers will make impulse purchases, and will end up buying things they don't want, don't need, and never intended to buy.
Before you make a purchase, fast forward a few days into the future and ask yourself, if at that point in time, you will be so passionate about purchasing the item. From that vantage point, you can better determine a want from a need.
3. Is the reason for buying this item simply to impress someone? It is not always wrong to want to impress someone, for example the person who is interviewing you for a job.
But many purchases can be for the sole reason of trying to "keep up with the Jones." I like this quote from some wise soul, "We buy things we don't need with money we don't have to impress people we don't like."
How true! So, see if you can determine how valid your motivation is for wanting to purchase the item.
4. How many hours must I work to buy this? One can better evaluate the personal worth of an item by determining the "sweat equity" that must be invested. This would be especially helpful for young people.
So, if that teenager is making $7.50 per hour at his 20 hour per week job, how many hours would he need to work in order to buy the $55 jeans he wants? After taxes, about 8 hours or two work days.
Are the jeans worth two days of work? When you add the "sacrifice factor" into the value of a purchase, it quickly begins to illustrate the value of the item to you, and whether it is an actual need or just a want.
5. Can I actually afford to buy this? Some people determine they can afford to buy something if they have enough credit line left on their credit card to add the purchase. It never dawns on them that they are going into debt to buy the item. It ought to raise a red flag that apparently they cannot afford it, but it often does not.
The best way to determine if you can afford something is to ask yourself
(1) "Do I have enough real money to pay for this without having to use credit or borrow?"
(2) "If so, is that money already reserved for something else I need?"
Having the cash is the first step, the second step is determining how useable the money actually is. Using money that is set aside for a car payment, is much different than using money that is set aside for eating out. So if there is cash on hand, make sure it is useable cash.
That will help us determine if the item is more of a want than need.
Conclusion: No doubt about it - the failure to consider the difference between wants and needs is a big contributor to unwise and wasteful spending.
That does not mean we should only buy things that are needs. Buying things we want is part of the result of living the American dream. Life needs to be enjoyed, not just endured.
But when almost everything we want is viewed as a need, it is dangerous to our financial health. So, stop and ask yourself some questions. This will help us identify wants from needs.
© Jim Garnett, The Debt Doctor
AskMrG Consulting, LLC
2216 SW 35th Street
Ankeny, IA 50023
President - Executive Director
Institute of Consumer Financial Education (ICFE)
ICFE - Institute of Consumer Financial Education - ICFE.info - 619.239.1401