Episode Summary:
In this week’s episode, we dig into the difference between wants and needs and then share 8 useful tips for buying less stuff. People think they need a lot of things, but they just want a lot of things in reality. We breakdown how you identify the difference, how to manage and minimize your wants, and how to use these learnings to save money.
Episode Notes:
We start with how we’ve both absentee voted and early votes, and share a reminder for everyone to get out there and vote! We then discuss how excited Maggie is for this topic, and Maggie tells Mike how he feels about the wants vs. needs. Our views on wants vs. needs have evolved over the years. We share our combined 77+ years of wisdom on this topic.
The definition of wants and needs:
- A need is something you cannot live without. A need is a shelter, food, water, some types of medicine or medical care, clothing, and other things you truly can’t live without. And within these needs, there are levels and layers of what’s truly a need versus something you just want. For example, some shelter, food, water, and clothing level is a need, but just a very basic level. The basics are clean water, rice and beans, some veggies, clothing that covers your body and keeps you warm, and a basic enough shelter over your head. Everything beyond that is a want or a desire that you have.
- Mike explains Maslow’s hierarchy of needs.
- A want is something you desire to possess or do, but not something you need to live. There are wants within almost every category of real needs. For example, you need to eat. You want to eat fancy cheese, out at a restaurant, or take the kids out for ice cream. You need to drink clean and safe water. You want to drink bottled water, sparkling water, craft beer, or expensive wine.
The difference between wants and needs and why this matters:
- There is a fine line between wants and needs. Being able to recognize that line can be the difference between you meeting your financial goals or not.
- If you spend the time breaking down what is a want vs. a need in your life, you could have some aha moments about what you truly need and how you’re spending your money.
- We are not suggesting you constantly deprive yourself. We do suggest you appreciate and recognize the difference between wants and needs, and use that insight to influence better purchasing decisions and savings habits.
- Escalating commitment is an important concept to understand. It’s a human behavior pattern where you increasingly face negative outcomes from a decision or investment you’ve made instead of stopping and changing your course. There are so many examples of escalating commitment with purchases. It’s very similar to the idea of lifestyle inflation. You buy a big fancy house, and then you need to fill it with furniture, and then you need a housekeeper because there’s too much for you to clean. You now live in this nicer neighborhood, and all of your neighbors are driving fancy cars, so you think you need to drive a fancy car. Don’t fall prey to this!
- Remember that it’s normal to struggle with this, and we all do! Nobody’s a perfect robot who can always resist all of the marketing out there.
How to you minimize and manage your wants:
- Stop impulse purchases by instituting a waiting rule. Use the 30/30 method coined by the Minimalists, someone else’s idea, or create your own rule. The Minimalists created a 30/30 rule to help them stave off impulse purchases, and it’s to wait 30 hours for any purchase over $30, and then if it’s $100 or more, they wait 30 days. We have personally used some version of a waiting rule many times, and we often find the impulse passes with some time, and we no longer desire the item anymore. We’ve also heard of others who put things in their Amazon shopping cart if they want them, and then they only let themselves order from Amazon once a month, and by the time they go back and see all the things they have put in their cart they no longer want most of it
- Create a purchase accountability partner, and run all new purchases by them. Make sure it’s someone who will hold you accountable versus someone who will enable you to buy tons of stuff. This could be your spouse, a good friend, or even someone you met within the personal finance community on Instagram. Find a friend, and use each other to discuss and approve each other’s purchases before they happen.
- Ask yourself some tough questions, and be honest with the answers. Is this something you will use regularly? Will this bring you joy? Do I have room to store this item? Am I willing to get rid of something else to bring this new item in? Can I truly afford it? Will it add value to my life? Am I buying this because I want it, or to impress someone else?
- Minimize how often you allow yourself to walk into a store or visit a website. Avoid getting into situations where you will be tempted to buy things. Out of sight, out of mind is a real thing.
- Walk around your house and look at all of the things you already own. Remind yourself how much stuff you already have, be grateful for it, and ask yourself if you truly need more. Learn to be content with what you already have.
- One in and one out rule. If you decide you’re going to get this new thing, agree to give up something else for it.
- Research less expensive or chapter alternatives to what you want. This could be buying something used, waiting until it’s on sale, using the public library, or borrowing it from a friend.
- Remember the purpose of marketing. Remember that it’s someone’s job out there to convince you that you need this item to be happy and to take your money in exchange for that. Sometimes that recognition itself reminds us not to fall prey to brilliant marketing. Don’t let the marketer win!
Top 3 Takeaways:
- Continually work to distinguish between your wants and your needs. It will help you make better decisions. Understand that the majority of the things you buy are likely wants and not truly needs. Recognizing this can significantly cut down on your purchases, expenses, and ultimately your cost of living.
- Use the tips mentioned above and tricks to minimize impulse purchases and situations where you’ll be tempted to buy things.
- Be grateful for all that you have, and save your money for future financial freedom or retirement.
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