An axiom of sound money management is distinguishing between our wants and our needs. Periodically I ask folks to share their best tips, and invariably this comes up. I’ve always nodded in agreement, yet as I think about it, it’s not nearly so simple.
What defines a want?
What defines a need?
Food is an obvious response as a Need – but even there, what do we mean? Simply ensuring our blood has the right mix of salt, sugar and water? Do we need precisely the optimal mix of nutrients so that we can operate at our peak? Or would less than our peak suffice? And what defines peak for that matter?
Shelter is another obvious response. Again: Do we need to be warm, dry and safe, in which case a good cave might suffice, or do we need a thick carpet, and big windows to let in natural light?
And what about our need for esteem? Do we even agree that it is a need? If so, does that legitimize top-quality, perhaps even designer clothing? A watch or jewelry that signifies we have good taste and invest in ourselves?
This is a personal area of interest for me – I was often conflicted as a money coach: Did I need to sport a great haircut, have well manicured nails and in general be “well heeled” to be taken seriously as someone with a measure of authority on the topic of money?
You see where I’m going with this?
So readers, I’m curious: what criteria do you use to distinguish your wants from your needs?