How to differentiate? Well, if you can’t afford to live without something, if it’s a means to helping you function in society, it’s a need. If you can shrug it off, it’s a want. If you want to improve your financial situation, whether this means getting out of debt or to stop living paycheck to paycheck, you are going to have to face one major thing – distinguishing between wants and needs.
The problem is that sometimes, the brain can trick you into transforming a “want” into a “need.” For example, you see a lovely pair of running shoes that you don’t actually require since you already have another pair of running shoes. However, your mind can play games and trick you into thinking of it as a need, i.e. “I need this pair of shoes so I can exercise better.”
The best way to start is to list down your personal definitions of “wants” and “needs.” This way, you’ll have a guideline to fall back on when your mind starts convincing you that “wants” are really “needs.” Be as objective as you can. Or try this experiment: Divide all of your spending into needs and wants. Before tallying things up, make a deal with yourself – for every dollar you spend on a want, put a dollar into savings for the future. Then tally things up.
Learning to make better choices and to differentiate between wants and needs will help you stay out of debt and reach financial freedom sooner. Learning how to control your spending will help you for years into the future, even as your income grows.
By realizing what are wants and what are needs, you’ll be able to cut some unnecessary spending and improve your financial situation.