What is the difference between a Need and a Want?
A Need is a service or purchase that you must make in order to get food, shelter, clothing, medical care, and maintain a job.
A Want is anything that is not a Need.
Here’s a somewhat edited picture of our monthly expenses, Circa 2007, broken down into Needs and Wants:
Needs:
House Mortgage/Rent $800
House Maintenance $ 70
Electricity $120
Water $ 40
Sewer $ 15
Car Repair/Maintenance $ 50
Car Gas $200
Medical $100
Food $250
Eating Out (Work) $120
Retirement $400
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Total $2165
Wants:
Cable TV $ 90
Movies $ 32
Entertainment, other $ 45
Eating Out $ 60
Internet Access $ 30
Charity $ 50
Family Assistance $250
Miscellaneous Expenses $150
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Total $707
Needs $2165
Wants $ 707
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Grand Total Per Month: $2872
Notice those totals? That’s right: If we really want to get ahead, the first place to start cutting is the Wants.
Notice under the Needs column that there’s a $120 entry for Eating Out (Work)? That’s right – it’s a Want. Drag it over into the Wants column. Now our Needs are down to $2045/month, and our Wants are up to $872/month.
(I put Retirement in the Needs column because, in my opinion, making sure that you don’t become a burden – or at least that you are less of a burden – to your children in your old age or infirmity is a very good idea. Certain financial experts will probably disagree with me, notably Dave Ramsey. But I think planning ahead, even if it is a short-term loss, is a critical need when you are in debt.)
This is the difference between Needs and Wants: Needs are services and purchases that you *must* make in order to have food, shelter, clothing, medical care, and maintain a job. If a Need is not ABSOLUTELY NECESSARY to maintain food, shelter, clothing, medical care, and a job, then IT IS NOT A NEED.
Notice the Charity and Family Assistance entries? Many people tithe a percentage of their income to a religious or charitable organization. Others also have family dependents – such as elderly or infirm relatives, or are financially supporting children through college or tough times.
Here’s Lesson #1 from this post: If you don’t take care of yourself first, you won’t be able to help anyone else.
Tithing to religious or charitable organizations: You will end up broke if you keep donating while you are in debt. You do not want to end up as someone receiving religious or charitable assistance. It defeats the purpose of making the donations in the first place.
Elderly or infirm relatives: You need to find one of those religious or charitable organizations to help defray the cost while you get out of debt.
Financial support for children: Young Master or Young Miss *must* start working part-time (at least, and if old enough in your state) to help reduce the cost. If they’ve already graduated from college, then it’s time to cut the umbilical cord. Stop. Giving. Them. Money. If they are living with you, put them to work taking care of that elderly or infirm family member to take the strain off of you. Or, put them to work donating their time in the local food bank, soup kitchen, or other charitable organization. Assign chores. If they don’t do them, evict them. If they live elsewhere, and are receiving “help” with their mortgage, make it a requirement that you get copies of all receipts and bank statements, or you’ll have to cut them off. I know, they’re your children, and you love them. This isn’t love. This is what you Want to do.
Supporting family members who are not incapacitated (mentally or physically) is a Want.
In the above example, cutting out the Wants not only reduces the financial bleeding, but puts up to $872 PER MONTH towards reducing debts. That is up to $9,000+ PER YEAR towards paying debts.