Financial basics: Need vs Want

One of the earliest skills to learn on the road to attain financial responsibility is to learn the difference between needing to buy something and wanting to buy something. This is incredibly important for all people but particularly young people and young adults. Schools have, in general, done very little to help prepare young people in the department of personal finance and fiscal responsibility. After turning 18, a young person may encounter a barrage of credit card offers, loan offers, and payment plans that make virtually every object attainable. Suddenly, no longer having the watchful eyes of their parents saying "no" to whatever purchase they were asking for, a young person has the freedom to make these decisions entirely on their own. While this can be a wonderful feeling, it can also be dangerous.

Credit cards and certain loan offers can have extremely high interest rates which can leave a young person buried in debt. Very quickly after entering adulthood, a person can end up fighting an uphill financial battle they may not have been prepared for or anticipated. What can be done about this? There are a number of things that can be done to help a person be better prepared. One helpful method may be to really examine what is a need versus want is something I simply want? A person can ask this question every time they encounter the impulse to buy something. This could be an exercise that a person does for a period of time (a month for example) and limit all purchases that are needs only. Initially, many things may seem like a need. Going through the exercise, it may be discovered that there's really very few necessities a person truly must have.

"I need that new outfit." Well, is it really a need? Do you not have any other clothes you can wear? Can you borrow a top from someone? A person may have felt it was a need simply because it was really cute. However, one can really do fine without it. "I need that new skin for a video game that I play." Is it really needed? It'd be nice and it might be a lot of fun, but it is not really a true need. What about ordering food for dinner? Is the surf & turf really needed? Seafood is nice but can something else that is more reasonable be ordered? Although this can be controversial, but even coffee can be debated whether it is a need or a want. Going through this exercise, a person can really learn more about themself and see where boundaries are. I wouldn't suggest that this exercise go on for too long, but a temporary timeframe can be enlightening.

If a person is doing well financially, obviously there is a choice to loosen the boundaries. However, on the average, people will encounter times when keeping an eye on their budget (personally or professionally) will be important and knowing how to determine and exercise the discipline to spend only on what is needed versus spending on what is wanted will be critical.