Needs vs. Wants

Let’s look at the question together… Am I taking a loan for something I need or for something I want?

It’s important to understand the difference between Needs and Wants because it can help you plan how to spend and borrow wisely. This will also prevent you from falling into a loan trap, i.e., taking on debt that you ought to have avoided. Figuring out if something is a Want or a Need isn’t hard. Ask yourself questions like “What will happen if I don’t have this item?” or “Can I live without it?” If nothing will happen if you don’t have it, or if you can live without it, the item is a Want. We must always first take care of our Needs because these are the things that keep us healthy, safe, and able to lead a good life.

Needs are things that we truly can be without, such as:

  • Food
  • A place to live
  • A good pair of shoes
  • A fridge
  • A fan, ventilator, heater or air conditioning depending on where you live
  • Transportation

Wants are things you’d like to have, but if you don’t, you’ll still survive (in fact, you’ll be just fine). For example:

  • Designer jeans
  • Toys
  • Candy
  • Video games
  • Extra vacations

Now that you have an idea of the things you need versus the things you want, it’s important to set your goals so you can actually save and spend wisely.

Here’s a simple exercise to get you started: list some of the things you have spent money on in the last two weeks (or, start keeping a list of everything you pay for in the coming two weeks) and identify which items are Needs and which are Wants. Prepare to be surprised! 🙂