I think it’s safe to say that when pressed, most people will be able to tell the difference between wants and needs. Yet, I see many people blur the distinction between the two using the words “want“ and “need“ interchangeably. Remember, nobody “needs” a big screen TV.
However, the difference between wants and needs isn’t defined by a fine line. There are many subtleties within them. If you understand these subtleties you can end up saving money, time and live a better life.
Focus on the Needs
There’s no guaranteed way to become rich, but the first step to getting there is learning to distinguish between wants and needs. I know I’m stating the obvious, but If you prioritize your life by focusing more on your needs and less on your wants, you’ll save money and time.
For example, food and shelter are a need, an iPad is a want. It’s a matter of lessening your expenses on those wants and saving more. More savings mean more money.
Levels of Needs
However, you can take this distinction even further. There are several levels of needs. For example, everybody needs to eat, but nobody needs to eat out at expensive restaurants. Restaurants serve your basic need of eating, but since there are alternatives to restaurants, you don’t need to eat there. Grocery stores serve the same need, yet are cheaper and just as effective.
You can take this a step further. When you are buying food at the grocery store, you can choose between name brand items and generic products. Generic products are cheaper than name brand products, plus generic products are almost always just as good as name brand items (with a few rare exceptions).
I’m going to let you in on a little secret that many people don’t know about marketing. There is a concept called brand loyalty. Brand loyalty is when consumers commit or are faithful to repurchasing a brand because that brand is something they know and trust. Basically, you’re trading higher prices for an emotional response.
This is nonsense. You don’t owe any brand any sense of loyalty. They serve a means to an end and that’s it. Oftentimes, brand loyalty is strong enough where someone will stick with Company A even if Company B offers the same item at a lower price and better quality. It is that strong.
Another example demonstrating levels of need is in your car. Most people say they need a car to live. In many cases this is true, but I know many people who live and work comfortably without one. They’ve never owned one and don’t want to spend their money buying one. Clearly this shows that cars aren’t as much of a need as many people would think.
Also, break down the basic need that a car services. It is there to get you from point A to point B reliably and safely. That’s it. A car that costs $40,000 serves this function just as well as one that costs $10,000. Nobody “needs” a car that expensive. You could argue that you have a need for status that only an expensive car like that would bring. However, this is still a want, not a need.
Focusing on Wants
Nobody can focus their entire life on their needs. That would be a boring, unfulfilling life and something that I don’t recommend. However, there are many things in life that we think we can’t live without and too often spend our money on without realizing how little we actually require them.
One extreme example is the “I Am Rich” app that was sold for the iPhone. It cost $1000 dollars to have and all it did was shine a red light on your phone indicating that you bought it. That’s it.
For the most part though, you can keep everything you want to do in life. There are just ways to make them less expensive and at the same time keep them just as fulfilling.
Just like the levels of need that were illustrated earlier, there are levels of wants. For example, I love movies. I realize that I could live without them since people had been living without them for thousands of years before they were invented. But movies fulfill a want in my life.
I could spend a lot of money on movies by buying them on DVD and seeing them on the big screen on a regular basis. However, I realize that I don’t need to own every movie on DVD so I am selective about it. Plus I wait until the price comes down before I buy it. That way, I still fulfill my wants, but I do so in a way that saves me money in the long run.
The same goes for seeing movies in a theatre. I could see movies opening night on the big screen or I could wait until it comes out in a cheaper theatre. If it is something I want to see really badly, then I will spend the extra money and see it on opening day weekend. Otherwise I frequent the cheaper theatres.
How This Makes Your Life Better
I think of this as a way of prioritizing the quality of life. By buying generic products from a grocery store, I still fulfill a need I have, save money and keep the quality of my life the same. This also goes for my wants.
I can see most movies in the theatre, save money and I don’t even have to change how often I go out to see movies.
If you can prioritize your wants and needs along these lines, you’ll increase the overall quality of your life. By saving money, you’ll have more at the end of the month to pay off debt, spend elsewhere or save. All this and you won’t even have to decrease your quality of life. In fact, you’ll probably increase your quality of life.