Nearly every personal finance book, article, video, story, and course that I've ever seen will tell you to classify your expenses into two buckets; needs and wants. The first thing to go when you are putting together a spending or savings plan are the wants.
I'm here to tell you, though, throwing away all your 'wants' is does not lead to good financial health.
Wants Versus Needs
Traditional personal finance education focuses on separating expenses into needs and wants. For example, your rent or mortgage payment would be a need while your weekly happy hour with your friends would be a want. It makes sense that if all you had left was enough money to pay your rent or to go to the bar with your buddies, you should pay your rent. Your car payment is more important than new clothes. Your electricity bill needs to be paid for before you go check out that new restaurant.
I fully believe that prioritizing our bills and savings is important. However, I don't think it's wise to ignore wants.
Basic Human Needs
Humans have six basic needs, and every behavior we have is designed to meet one or more of these needs. Those needs are:
Our use of money supports these basic needs. For example, paying rent gives us safety, and possibly self-expression. Going out for weekly happy hour with our friends gives supports our need for connection, and maybe purpose.
Wants = Strategies
When people say something is a "want" they mean that it is a strategy to meet a need. Paying the rent is a strategy (a good one) to meet our need for safety. Going to happy hour is a strategy to meet our need for connection.
Our goal should not be to read a book that tells us to get rid of our wants and scrap our happy hours. Our goal could be to find a new way to meet our need for connection in a less expensive way.
Just because I'm advocating for looking for underlying needs doesn't mean I support all strategies to meet needs. We can meet our need for belonging by trying to keep up with the Jones' or our need for connection with those weekly happy hours, but those aren't necessarily the best strategies, or wants, to use.
Figure Out Good Strategies
You can change your strategies, and therefore your wants by becoming clear what is important to you in life and how money helps you focus your life in those areas. If you focus on your needs and design effective strategies to meet those needs you'll be well on your way to good Money Health.
Be Awesome, Not Broke: Rethinking Needs vs. Wants
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