First of all, let’s not get confused with definitions. I am writing this to laymen and not economists. The latter has very different definitions on “need” and “want”. Here I define a “need” as a product or service that we require to live. A “want”, on the other hand, is something you desire to have but is not really essential to your life. Of course, our experiences tell us that it is not easy to differentiate between the two. When our income or earning power grows, some of the “wants” become “needs”.
When I was a student in overseas, I weighed my potential purchases very carefully and divided them into “needs” and “wants” before making the decision to buy or not to buy. The relatively weak Malaysian ringgit really did not give me much choice but to be thrifty in all things.
When I started my family, I decided not to put them into financial stress, I chose to continue the classification of household expenses into “needs” and “wants”. My wife and children sometimes laughed at me that I am just living without enjoying life. Well, I think being able to manage my household income and expenses well without having to bear the pressure of debts makes me enjoying life more than having luxuries.
Getting down to the reality between wants and needs is essential to an effective family budget.
I just would like to share some tips on how identifying wants and needs can go a long way toward effectively saving money as a family.
Everyone needs some kind of shelter. Your shelter needs will be different from those of others, but if you are focused on wants you may end up getting in over your head. Here are some things to consider regarding your shelter wants and needs.
- Apartment versus house
Whether or not you go for an apartment or a house – which one you really need – depends on family size and income. What it should not depend on is prestige or the need to prove something to friends and family. Consider, too, if you are willing to put in the time, work, and money required to keep up a house.
- Bedrooms and bathrooms
How many bedrooms and bathrooms do you need? Does everyone have to have his or her own bedroom? Does your family need two or more full bathrooms? What you need is for everyone to have a place to sleep comfortably, and for everyone’s bathroom needs to be met (using the toilet, showering, fixing hair, etc.).
Privacy is a need that means more to some people than others. Consider your family’s privacy needs when deciding on the number of beds and baths. For most families, one full bath and then one other working toilet is enough.
This is a big one – food expenses account for a big portion of the household budget. Determining a food want from a food need can get pretty dicey, so let’s look at the basics. What you need food-wise is three healthy meals a day and two to three healthy snacks. You don’t need candy, cookies, cakes, ice cream, and so forth. Some would argue that you don’t need meat or dairy. As you buy your food, ask yourself if it is something your ancestors would have eaten before there were supermarkets. If it’s not, you probably don’t need it!
What your family needs are clothes that fit, look decent, and keep everyone cool or warm and protected from the weather. What family members may want is the latest brand-name T-shirt even though they have fourteen other T-shirts. Buying only what you really need here is a big money saver. Do you need three black jackets or seven pairs of brown shoes? No. You may want them, but that’s different!
Abundant or Miserable Life Together? It’s your choice
You probably notice that all these absolute essential family expenses can be weighed against the scales of “needs” and “wants”. My advice is to use your credit card as a charge card without living in debts. If you cannot resist spending, just choose to leave the credit card at home which I shared in a previous post (click here to read) If we are willing to sacrifice a temporal excitement and enjoyment for a longer term benefit of the family, why not? After all, it is our aim to build a strong family that enjoys abundant life together – a heavy household debt is a sure recipe for misery.