ICFE eNEWS #15-27 - September 8th 2015
VS Needs 2: 5 Questions To Ask"
In our last discussion about "Wants Vs. Needs" we listed
5 beliefs that will make us see many of our wants as needs: (1)
If I can get it, I need it, (2) If I deserve it, I need it, (3)
If it makes me look more important in the eyes of others, I need
it, (4) If I am accustomed to having it, I need it, and (5) If it
is a good bargain, I need it, Those beliefs will result in us labeling
almost everything as a need instead of a want.
By Jim Garnett, a/k/a Ask Mr.G,
a member of the ICFE's Board of Educational Advisors
Now, let me
give you 5 different questions that will help us determine whether
the desired item is actually a want or a need.
1. What will
happen if I don't buy this? There are usually serious repercussions
to not meeting our needs. On the other hand, there are usually few
repercussions to not meeting our wants.
So, to help determine
a want from a need, ask yourself "What will happen if I do not purchase
this? What hardships will be created? Are safety and protection
an issue? Will anyone be put in jeopardy?"
The answer to
this question does not necessarily determine if you should buy something
or not, but it does help you sort out if it is a want or a need.
2. If I wait for several days, will I still be so passionate
about buying this? Have you ever purchased something on a vacation
trip out of impulse? After a few days you begin to like the cowboy
hats that these people in Arizona are wearing. So, you buy yourself
a Stetson and proudly wear it for the rest of your vacation.
Unfortunately, when you get back home to Minnesota, your Stetson
looks completely out of place, so you place it on Craigslist. This
is the sad result of impulse buying.
This is also a real
danger at the checkout counters. A recent survey by The Checkout
revealed that 9 out of 10 shoppers will make impulse purchases,
and will end up buying things they don't want, don't need, and never
intended to buy.
Before you make a purchase, fast forward
a few days into the future and ask yourself, if at that point in
time, you will be so passionate about purchasing the item. From
that vantage point, you can better determine a want from a need.
3. Is the reason for buying this item simply to impress someone?
It is not always wrong to want to impress someone, for example the
person who is interviewing you for a job.
But many purchases
can be for the sole reason of trying to "keep up with the Jones."
I like this quote from some wise soul, "We buy things we don't need
with money we don't have to impress people we don't like."
How true! So, see if you can determine how valid your motivation
is for wanting to purchase the item.
4. How many hours must
I work to buy this? One can better evaluate the personal worth of
an item by determining the "sweat equity" that must be invested.
This would be especially helpful for young people.
that teenager is making $7.50 per hour at his 20 hour per week job,
how many hours would he need to work in order to buy the $55 jeans
he wants? After taxes, about 8 hours or two work days.
the jeans worth two days of work? When you add the "sacrifice factor"
into the value of a purchase, it quickly begins to illustrate the
value of the item to you, and whether it is an actual need or just
5. Can I actually afford to buy this? Some people
determine they can afford to buy something if they have enough credit
line left on their credit card to add the purchase. It never dawns
on them that they are going into debt to buy the item. It ought
to raise a red flag that apparently they cannot afford it, but it
often does not.
The best way to determine if you can afford
something is to ask yourself two questions: (1) "Do I have enough
real money to pay for this without having to use credit or borrow?"
(2) "If so, is that money already reserved for something else I
Having the cash is the first step, the second step
is determining how useable the money actually is. Using money that
is set aside for a car payment, is much different than using money
that is set aside for eating out. So if there is cash on hand, make
sure it is useable cash.
That will help us determine if the
item is more of a want than need.
Conclusion: No doubt about
it - the failure to consider the difference between wants and needs
is a big contributor to unwise and wasteful spending.
does not mean we should only buy things that are needs. Buying things
we want is part of the result of living the American dream. Life
needs to be enjoyed, not just endured.
But when almost everything
we want is viewed as a need, it is dangerous to our financial health.
So, stop and ask yourself some questions. This will help us identify
wants from needs.
Jim Garnett, The Debt Doctor
AskMrG Consulting, LLC
Ankeny, IA 50023
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Paul S. Richard
President - Executive Director
Institute of Consumer
Financial Education (ICFE)
About the ICFE:
The Institute of Consumer Financial Education (ICFE) was founded in 1982 by the late Loren Dunton (creator of the Certified Financial Planner (CFP) designation). The ICFE is dedicated to helping consumers of all ages to improve their spending, increase savings and use credit more wisely.
The ICFE is an award winning, nonprofit, consumer education organization that has helped millions of people through its education programs and Resources. It publishes the Do-It-Yourself Credit File correction Guide, which is updated annually. The ICFE has distributed over one million Credit/Debit Card Warning Labels and Credit/Debit Card Sleeves world wide.
The ICFE became an official partner with the Department of Defense/Financial Readiness Campaign in June of 2004.The ICFE was an active partner in the California Student Debt Resource Awareness Project (CASDRAP) which resulted in a new web site: (studentdebthelp.org). CASDRAP disbanded in 2010, shortly after the web site project was completed. In 2011 the ICFE assumed the single sponsorship of the (studentdebthelp.org) web site and is now responsible for its content and operation.
The ICFE is also an on-line help for consumers who spend too much. ICFE's spending help was featured in PARADE Magazine in the Intelligence Report section. The money helps and tips are from the ICFE's Money Instruction Book, our course in personal finance.
Visit the ICFE's other web sites at: www.financial-education-icfe.org and studentdebthelp.org. Both sites helps consumers and students with mending spending, learning about the proper use of credit, budget and expense guidelines, how to set up and implement a spending-plan and also how to access financial education courses and how to teach children about money. Other ICFE services include: Ask Mr. G, a free eNews, and an online resource center for students, parents and educators, plus financial education learning tools and a book store.