In order to manage your household finances and your budget properly, you must make sure that the most important things in your life—your needs—are taken care of before you begin to start to think about taking care of your wants. Sometimes, it is hard to tell the difference between needs and wants because certain things which were, at one time considered luxuries, are now today seen as needs.
Let’s define these words:
What are needs? Needs are things that you must have in order to survive. Your basic needs are food, clothing, and shelter, but can also include items which you must have to be able to make a living, such as reliable transportation to and from work, personal care expenses and electricity.
To find out if an item is a need or a want, stop and think about where that item stands in your life. If that item were taken away, would you be able to survive? Would you be able to provide for yourself or for your family?
Wants; on the other hand, are things that make life enjoyable but are not necessary for survival. Sometimes, it is easy to confuse wants with needs.
For example, you can tell yourself that it is okay to buy a bigger house than you can comfortably afford because shelter is a need. However, when you think about, you will probably see that a smaller house will fulfill your need for shelter —and also help you stay out of unnecessary debt!
The same is true for other items. Will a cheaper mobile phone allow you to make all the calls that you need to make? These are questions that you need to ask yourself and answer honestly before you spend money on things that you think are needs but are really just wants.
Now, this does not mean that it is wrong to spend money on wants?
No, it is not necessarily wrong to spend money on the things you want but may not need. In fact, the comfort and convenience of wants can add to your quality of life. But the reality is that not everybody’s income can cover all their wants, so choices have to be made – but those choices should be made only after all needs have been taken care of.
Knowing this important difference between needs and wants helps you to make the right decisions when a financial emergency arises. It will help you manage the cash that you and your family have available at any given time and give you true financial freedom.
This has been courtesy JAIZ Bank as part of The Bankers Committee Financial Literacy Public Enlightenment Programme brought to you by The Bankers Committee, comprising all the commercial Banks in Nigeria and the Central Bank of Nigeria, CBN.
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