Do you ever tell yourself or others, there’s never enough money? Is that really true? For some, it may be. Do you know the difference between “needs” and “wants” or do you simply throw up your hands, believing your spending is all the same?
By definition, needs are described as your basic expenses, things you must have to live. Examples are food, gas, rent, power and heating bills. Wants are the things we really like. These “things” would be nice to have but you can live without them. They are Tim Horton’s coffee, books, new clothes and tools. The confusion begins when we see our wants as needs. Every item we purchase is viewed as a need without any distinction. All expenditures become “must-haves.”
Let’s introduce a new idea. If we look at sorting our expenses the same way we sort our laundry, then we get a clear view of how our spending can be divided into piles of needs and wants. When sorting laundry, generally you have three piles: whites, darks and colours.
Whites are “needs,” the things you must have to live.
Darks are “wants,” the things you like which are often mistaken for needs.
Colours are “real wants,” the things which “colour” your world. They are the kitchen renovation, the trip to Vegas to escape from Saskatchewan’s cold winters, or the new sofa and loveseat. Maybe it is the money for your child’s university tuition or building your emergency savings. Whatever colours you want in your world will be unique to you.
How can you focus on colouring your world? The first thing you must do is track your spending for a week (or a month), and then sort through your list of expenses. Think of going through your list as sorting laundry into your three piles: needs, wants and real wants.
My best guess is that, at this moment, most of your expenses fall into only two piles: whites (needs) and darks (wants). The goal is to reduce the spending on the things you want to start savings for the things you really want, or moving expenses from the darks to the colours.
You may not realize the “things” on which you overspend. When you try to stretch money to last the month, it is not possible. The problem begins when you rely on credit to pay for your wants. The wants are what get us into financial trouble. Have tough conversations with yourself. I understand you can always make an argument defending why you “need” to buy something that really is a “want”. Who are you kidding, though?
Recognize, Realize, and React are my three “R’s” if you are sincere about colouring your world with real wants. Recognize your spending habits. Realize you are in control. React by developing new spending techniques.
Here are a few clues to help you follow the 3 “R’s”.
1. Learn to say “No, Thank you!” to yourself and others. It’s easy to say $5.00 spent on coffee and muffin, $15 on lunch with a friend, and $30 on a new sweater, are insignificant yet the point is all purchases add up. Saying “No” may require some practice.
2. Don’t let convenience steal your money. The line-ups at the drive through at meals times are endless. With a little planning, you may not need to spend money on take-out. Packing lunch for the office or finding ways to be creative with meal planning at home can save money for your real wants.
3. Identify your weakness. I believe we all know our own weaknesses. Finding ways to steer clear of temptations could go a long way to building your savings.
4. Make wise decisions about specific purchases. Extra money does not necessarily have to be spent on the best things when other good quality items will work just fine.
5. Check your credit card statement for the amount of interest spend on “wants”. This may deter you from continuing to purchase so many “wants”. The interest incurred could be directed to your “real wants” rather than an added unnecessary expense.
6. “Reduce” doesn’t necessarily mean “eliminate”. Reducing the number of times you go to a restaurant each week for coffee with friends doesn’t mean stopping entirely. The question is how you can find different ways to socialize that don’t cost money.
7. Rather than making purchases on a whim, create an impulsive buying list as you shop. That means recording the things you would like to buy as you see them. Then let some time pass to determine whether these purchases are important. Are they “needs” or “wants”? Impulsive buying can steal your joy from saving for and purchasing your “real wants.”
Examining your spending and identifying your needs, wants, and real wants is a effective way to stretch your money. The harm you do to yourself happens when you spend money on things you only half want. These things accumulate into stuff you don’t need. So be like Santa. Take a look at your list, check it twice, and determine where you can make changes in your future spending habits. If you want to get more out of life, developing good money management will “colour your world”.