Needs vs wants. Now we get it.
Financial lessons have traditionally focused on the conflicting priorities of spending on needs vs wants. We ask ourselves this question (or rather, we should) as we hold an item at the store and contemplate its purchase: “Do I really NEED another black dress?”
Likewise, we don’t think twice when we buy eggs or toothpaste because we know that we need these.
Enter the COVID-19 pandemic of 2020. The US economy is hitting the skids in large part because spending has stopped around those things we only want instead of need, such as:
- Dining out
- Personal care services (admittedly, I sure would love a massage right now)
- Designer clothing
- Discretionary and optional spending of all types
With this halted spending, the employees previously working in these industries have been laid off. They now are without an income to pay for housing and other needs. Unemployment is high. Landlords aren’t collecting rents. Recession is certain.
Which industries are thriving? Those which provide our needs: Grocery stores. Healthcare. Utilities.
Every single one of us is seeing the stark contrast between needs vs wants, some of us really recognizing it for the first time:
- Those who have been laid off are financially focused solely on getting needs met: housing, food, utilities, healthcare.
- Those who fear a layoff are focusing on the same while opting to cut out optional and discretionary spending in a mad attempt to squirrel away emergency funds. That savings will be essential to pay for necessities if income goes away.
- Even those with job stability who are finding themselves sheltered at home and breaking their daily Starbucks habit; they are seeing this distinction between wants vs needs clearly and inadvertently saving a lot of money.
I see a big change for all of us going forward. We now know that we should:
- First, pay for NEEDS – it no longer makes sense to budget groceries alongside dining out. Groceries are an essential need wheres dining out is discretionary. We now understand the importance of identifying and prioritizing needs ahead of wants.
- Lastly, spend on WANTS.
If you need help doing this, go get our free Quick Guide to Wrangling Your Money and see tip #4. There is a worksheet to help identify living costs – which are all needs and other committed monthly costs (such as debt and memberships). Identify living costs in total to provide clarity over how much money is required each month to cover these. Get it here at buckthebudget.com.
Let’s use this crisis as an opportunity to do things better going forward – to finally identify needs vs wants in our financial plans.
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