Two nights ago my wife Ann and I were talking about cars and spending habits (seriously, this is what a financial planner and his wife talk about after a great date of beer and burgers) and I asked her a question:
Annie, if money was no object, what kind of car would you buy? Her answer was incredibly awesome: “I think I would buy a minivan….no a completely decked out minivan”
This morning I read the InForum story Money-savin’ Mama: Learning to say no, and yes, to spending, written by Sherri Richards which made me think of my own spending behavior. Check out her blog and some of my additional commentary here: TopMom
We all have goals and priorities whether we actually write them down or not. We see something posted on Facebook by our friends such as a great vacation, a new car, some new clothes or something else that we envy and ultimately think we need it too. Or, maybe we receive a mailer, email, or some other type of advertising that appeals to us and our desired lifestyle. If we don’t acknowledge our behavior we fall into the trap of confusing a want with a need.
Ann understands priorities and, although she enjoys nice things, her want in a car aligned with the practicality of our situation; we have twin toddlers that need a reliable mode of transportation. She still wants luxuries but those luxuries are in line with the need.
If you struggle separating wants vs. needs, I offer you a few tips:
- Delay the decision: By delaying the decision to buy something you give yourself space between the decision to buy something and actually buying it. One way I do this in my life is by using wish lists. Amazon.com has a wish list that I use when I see something I want. By putting it on my wish list and walking away, it gives me time to sleep on it and decide if it is something I actually need. If I still want it a few days later, I buy it; 99% of the time I don’t buy my wish list items.
- Hire an unbiased 3rd party: By hiring a financial planner, CPA, or attorney you now have someone that can look at your situation through an unbiased lens and give you practical advice on the best course of action.
- Budget: Budgeting sounds like the most practical way but sometimes it is the most difficult. By utilizing an envelope system (here is an envelope system “prettified”) you physically set money aside in envelopes so you have a tangible way to divide and conquer your cash flow. Mead developed an organizer that does a pretty good job of organizing your budget. You can buy that organizer at Target and I have provided a link here: Mead Expense Tracker
- Substitute: Recently I purchased a car, a Cadillac actually…..with a few dents, $52,000 miles and it is a 2000 model. My wife wants a minivan, I really want a huge gas guzzling SUV with all the decked out features. The only reason I purchased a Cadillac was because I needed a big safe car that could transport my twin babies in car seats, something my Ford Ranger wouldn’t allow. After looking around for quite some time, I had a friend who was selling his mother’s car so I put my Ranger up for sale, sold it in a week for $5,000 and purchased my Cadi in cash for $5,500. Ann and I can afford that SUV but we are taking that extra car payment and applying to more necessary alternatives such as retirement planning and debt elimination. We weighed our options and made a choice based on our situation not based on impulse.
What suggestions do you have? Are you doing anything that readers could use in their daily life?
Author, Carl Richards, provides a great back of the napkin illustration of that constant battle between wants and needs (go to the original source of the illustration on the bucks blog entitled The Struggle to Define What We Truly Need)
The information in this article is not intended to be tax and/or legal advice and should not be treated as such. You should consult with your tax advisor and/or attorney to discuss your personal situation before making any decisions.
Additionally, If you are looking for additional help, seek help from a CERTIFIED FINANCIAL PLANNER™ Professional that can look at your individual situation holistically.