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Balancing Your Wants And Needs

By Mark Riddix

Managing your finances can be a juggling act. One of the most important skills is being able to properly balance your wants and needs. Sometimes it can be difficult to tell the difference between a want and a need. Wants are those items that you don’t really need for survival but desire to have. Wants can masquerade as needs because of your desire for them. The bad thing about wants is that they can actually rob you of something that you really need by taking away the necessary money to support your needs.

Let’s take a look at a few of the wants that can rob you of your needs:

1. Brand New Luxury Car vs. Funding the Retirement Plan

Is your car robbing you of your retirement dreams? A shiny new luxury automobile may look great on the dealer’s car lot but it may not look so good sitting in your driveway draining you of your money. Brand new luxury cars come with big monthly payments that can put a huge dent in your budget. It can cost anywhere from $600 to $1,000 a month to drive a BMW 5 Series, Mercedes E Class, Lexus GS Series, Infiniti M Class, or Audi A6. That doesn’t even include the down payment. Luxury cars also come with premium gas fill-ups, insurance payments, and maintenance expenses. It’s a lot of money to plunk down for a depreciating asset that will only quickly take money from your bank account.

2. Latest Designer Clothes & Shoes for Your Kids vs. Funding College Education

Kids love clothes. Many Americans spend lots of money making sure that their kids are outfitted in the newest styles and fashions. Clothing brands are often in style one year and quickly out of style the next. It’s not worth paying $120 or more for a pair of jeans that your child may not even be wearing in a few months. Your child would ultimately appreciate it even more if you instead used that money to pay for their college education. Saving your child from student loan debt is a great way to start them on the path to financial freedom. One of the best gifts that you can give your child is a fully-paid education.

3. Shopping vs. Being Debt-Free

Living debt-free is the dream of every person. Reducing your bills means that more of your income will find its way into your pocket. The number one thing that forces most Americans to keep working in their golden years is debt. Too much money is squandered on frivolous purchases that commercials tell us that we need to have. We’re constantly told that flat screen HDTV’s, Blu-ray players, and new smartphones are essential items that we cannot live without. Big ticket items like 3D TV’s may be exciting to purchase when they first come out, but they can also be albatrosses that drive you deeper into debt. Every time that you charge something on your credit card, you are pushing yourself further away from your debt-free dreams.

Have you ever had trouble telling the difference between something that you really wanted and something that you needed? Were you able to resist the urge to give in to the want? I’d love to hear some more examples to go along with the post!

(Photo credit: U-G-G-B-O-Y)

Mark Riddix
Mark Riddix is the founder and president of an independent investment advisory firm that provides personalized investing and asset management consulting. Mark has written financial columns for Baltimore and Washington, D.C. area newspapers and is the author of the book, Your Financial Playbook.

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  • Winnie

    This is so true! This is a whole different way to look at purchases.

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