The Cost of Necessity

September 15, 2010

Twice a year I have the opportunity to speak at the local crisis pregnancy center to a group of young men and women about managing their finances.  Now I don’t care how old or how young you are; whether you make a lot of money or just a little—we ALL need help when it comes to managing our money.  Most of us learned to manage money watching our parents, and I think many of you would agree that they could probably use some help too.  But among the things we talk about, the one that I often get a kick over is the subject of ‘wants vs. needs’.  Now you might think that wants and needs are fairly easy to determine, and in many cases you’d be right, but there are several instances when it may not be as black and white as it first appears.

Let’s start with needs.  Most of us can identify needs pretty quickly.  For me, food, clothing and shelter are all forms of needs.  But what kind of food, clothing and shelter are we talking about?  Is going out to dinner a necessity because we need to eat?  Is buying designer clothes, or living in a home above our means a need?  Of course not, so how do we appropriately distinguish between a want and a need?

Well, here is one way to approach the subject that has worked in my household.  We start by redefining the terms.  Instead of wants, we are going to call them “lifestyle choices”, and instead of needs, we are going to call them “if I was down to my last dollar, would I need to buy this?”  (Okay, I really don’t call it this, but you get my point.)  So, starting from this point, let’s look at some common “needs” and see if they are really “lifestyle choices”:

1. I need to eat.  True, we all need food and water, but there is a big difference between going to the grocery store to buy fruits, vegetables, milk, eggs, etc. and going out to eat at a restaurant.  Not only will dining at home save you money, it’ll probably be better for your health too.  Eating = need; eating out = lifestyle choice.
2. I need a new car.  Well, what you probably need is transportation, and having a vehicle is one way to satisfy that need, but when you consider the cost of a new vehicle, and the fact that it loses 40% of its value as soon as you drive it off the lot, what you really need is to reevaluate your financial priorities.  Transportation = need; new car smell = lifestyle choice.
3. I need a cell phone.  Just about everyone these days has a cell phone, and for many it is an important part of their occupation, but when I see teenagers texting their friends it makes me scratch my head and ask, “How did these kids survive 20 years ago when cell phones were science fiction?”  I agree that communication is important, which is why I’ll buy my kids a prepaid phone with limited minutes so that IF they need to get a hold of me, they can, but my kids don’t need unlimited anything at this point in their lives – sorry kids.  Communication = need; unlimited talk = lifestyle choice.

These are just a few, but I’m sure you can think of many more on your own.  So shoot me your ideas of things that are misidentified as necessities, and we’ll compare notes.