The Dirty Lowdown: Distinguishing Wants from Needs

Nothing you can’t handle, nothing you ain’t got
Put the money on the table and drive it off the lot…
Got to have a Jones for this, Jones for that
Well this running with the Joneses, boy
Just ain’t where it’s at
– from the Boz Scaggs song “Lowdown”

In 1976 Boz Scaggs released his critically acclaimed album Silk Degrees.  I was only in 5th grade at the time, but to this very day that album continues to remain a guilty pleasure of mine.  In the brilliant, strutting, track “Lowdown”, Boz casually warns a buddy to “face the sad, sad truth” and quit his indiscriminate spending before it leads him down the road to financial ruin.

For many people, “running with Joneses” is a highly competitive sport. Unfortunately, many people who end up playing that game end up putting themselves in a real monetary bind that adversely impacts their ability to achieve financial freedom.  Those who choose to keep up with the Joneses should make sure that, before they play such a fools’ game, they know the difference between a want and a need.

So what, exactly, is the difference between a want and a need?

Well, I could go to Webster’s Dictionary and pull out the actual definitions, but why bore you?  Instead, I think it would be much more fun to use a few real-world examples to illustrate the differences.

What you want is a: Lexus GX470

But all you really need is a: Dependable fuel-efficient auto to get to and from work each day.

What you want is: a big piece of chocolate cake

But all you really need is a: a nutritious meal

What you want is a:  3500 square foot McMansion for your family of 4

But all you really need is a: house with a solid roof over your head, 3 bedrooms and 2 baths

What you want is a: luxury Coach handbag

But all you really need is a: modest purse that is capable of securely carrying your personal belongings

Now when it comes time to put together your household spending plan (better known as a budget), being able to distinguish between wants and needs is an absolute necessity.  I’ll talk about building a budget in a later post, but for now, suffice it to say that the number of wants that most people have far far outnumber their needs.

When taken down to the most basic level, I will argue that all of us have only four or five primary needs.  Those needs are food/water, clothing, shelter, transportation (for most of us), and health care.   Everything else is a want.

Of course, those basic primary needs I just mentioned can still be subdivided into wants and needs.  (Nothing is ever plain cut and dried, is it?).  Let’s see how that works:

Food and water: For the most part, the basic groceries we buy from week to week are needs.  However, choosing the generally uneconomical route of eating out at restaurants is a want.  Likewise, the decision to buy New York strip from the butcher instead instead of hamburger is a want.

Clothing: Unless you spend your days living at a nudist colony, clothes are a definite need.  That being said, your decision to buy designer clothes over no-frills brands with less cachet is a want.

Shelter: Even Grizzly Adams lived in a cabin.  Shelter is definitely a need.  Although living in a one room cabin to save money is a bit extreme, choosing to live in a McMansion, with all of the heating/cooling, maintenance, and furnishing issues that comes with it is definitely a want.

Transportation: The sad reality is those of us who are not fortunate enough to live in a city with a fantastic public transit system, or do not telecommute, have to have a dependable form of transportation to get to and from work.  Choosing to get there in a luxury car, however, definitely falls into the “want” category.

Health care: If you are young and unmarried and/or childless you may be able to get away with rolling the dice and going without, or with only catastrophic, health coverage.  Otherwise, healthcare is a hard requirement.    If you are working, and especially if you are the sole bread-winner like I am, sufficient life insurance to provide for your family in the event something happens to you is a need.  Now, here’s one last compare and contrast in this category for ya:  Braces for the kids are a need.  As for a tummy-tuck or boob-job — mark those as wants.

Being able to distinguish between wants and needs is directly tied to your ability to accept personal responsibility.   Understanding the importance of personal responsibility is one of the four principles that every household CEO must know and adhere to, and I will address that topic in my next post.

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