Mastering your budget requires a high level of “financial honesty.”
In this module, we’ll learn how to categorize your spending accurately so you can prioritize what truly matters., Welcome to Module 4.
Module 4: The divide
Lesson 4.1: Defining the Categories
In today’s world, where marketing rules and convenience is king, it’s super tricky to tell the difference between what we actually need and what we just want. Ads have a way of messing with our priorities, making us grab things on impulse and mixing our essentials with fancy stuff. This mix-up doesn’t just change how we shop, but it also shapes the bigger picture in the market, giving companies a chance to play these gray areas to boost sales and keep us coming back for more.
- Needs: These are the essential requirements for survival and maintaining your livelihood, focusing on what individuals must prioritize for well-being and stability.
- Examples: Basic housing, utilities, transportation to work, groceries, minimum debt payments, health insurance, and access to medical care
- Wants: These are things that enhance your life but aren’t strictly necessary for survival.
- Examples: Dining out at fine restaurants, designer clothing that makes a statement, high-end gym memberships that offer exclusive amenities, hobby supplies for creative pursuits, streaming services for diverse entertainment, luxurious vacations to exotic destinations, premium coffee from specialty shops, and the latest tech gadgets that elevate daily living
Lesson 4.2: The “Need” Spectrum
Sometimes, a need can become a want based on the price point, especially when something is priced very attractively, enticing us to consider it as a desirable addition to our lives. This shift in perception can occur due to various factors such as marketing, societal trends, or even personal aspirations; as we see others enjoying items that were once mere necessities, our desires can evolve, blurring the lines between what we truly need and what we only want.
For example:
- The Need: Reliable transportation to get to your job.
- The Want: A brand-new luxury SUV with heated seats and a sunroof.
Quiz: Need or Want?
Test your financial knowledge! Read through each quiz question below and simply click the arrow to reveal the correct answer.
1. You need a phone for work and safety. Is the latest $1,200 flagship model a need or a want?
- Need
- Want
Check answer
- Want – The phone is a need; the premium model is a want.
2. Which of the following is almost always a “Need”?
- High-speed internet (for a remote worker)
- A daily latte from a café
- A third streaming service subscription
Check answer
High-speed internet (for a remote worker)
3. If you can’t pay your electricity bill, but you bought concert tickets, what happened?
- You prioritized a want over a need.
- You had a fixed expense emergency.
- You practiced zero-based budgeting.
Check answer
You prioritized a want over a need.
Activity: The “Wait and Weight” Test
Pick one item you currently want to buy. Ask yourself these three questions:
- Will my life be physically or professionally compromised if I don’t have this in 48 hours?
- Am I buying this because I’m bored, stressed, or happy?
- If I had the cash in one hand and the item in the other, which would I honestly rather keep?
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