Page 23 - Book5E

Take out a piece of paper and a pen. At the top of the paper write Food, Transportation, Clothing, Home. We all know these are the basic needs required to survive. Now divide the paper into two columns. Label one column Needs and the other column Wants. The difficulty for most people is deciding what are needs within these basic areas of survival and what are really just wants—things you don’t really need to spend your money on. You need a place to live; you may want to own a home. You need clothing; you may want a specific brand or style. These are the decisions that help you reach your financial goals successfully or make you miss the goal by a large margin. Transportation doesn’t have to be a Lexus, but it doesn’t have to mean a scooter, either. You don’t have to live like a monk; you just have to live within your means. A car could be high up on your list of needs because your job requires that you spend a lot of time in your car each day, so comfort is a priority. In that case, you may choose to spend a bit more in this area. As long as that doesn’t mean you’ll eat macaroni and cheese for a year, you’re okay.
Review the list you’ve made over and over for several days. Sleep on it. Learning to be honest about what really defines a need will be one of the most valuable things you do to achieve financial success. Many people find that what they thought were needs are actually just wants. The Lexus, the house with the hefty mortgage, the personal shopper at the department store, purchases like these can soon translate into bankruptcy if you are living beyond your means. Make sure your needs are really needs. After the basic needs are met, you can choose to buy some of your wants as they fit into your budget.
Let’s Review__________________________________
To help you learn to define which items are wants and which are needs, complete the simple exercise below. Assume you have $25.00 for gro- ceries. From the following list decide which items you will buy. Put a check in the appropriate box for each item on the list. Think about which items are necessary for healthy survival and which items are
Why We Spend
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