by Annette Poro

Created on: May 23, 2008   Last Updated: June 10, 2008

How to Identify Needs Versus Wants When Reorganizing Costs

We all want so much! From candy bars to cars. But what do we actually need?

In 1943 Abraham Maslow (1) said we need air, water and food; we need to feel safe; we need love; we need others to think well of us; and we need to follow our star', to be the best we can. This was a long time ago but marketing people who tell us that cars, cosmetics and carpets will impress our friends or that enrolling on a particular course will make us smart.

are still applying Maslow's theory.

As you read this, thousands of marketing executives are figuring out clever ways to get you to give them your hard-earned cash. Their job is to convince you or your child that you need something, a muffin, a make-over or a mansion by the sea. Temptation is placed before you everywhere, ever day. To tickle your deepest desires. And extract your cash from your pocket.

We all need to plan how to separate our wants from your actual needs and take back control of how we spend our own money in the commercial world we live in.

So, what can you do?

First get a small notebook and pencil to take around with you. Write down every day for a month every single cent you spend and what you spend it on. This exercise is really important as it tells you the facts about your spending. At the end of a month you will have a reasonably accurate picture of where your money goes. Multiply the figure for each type of spending by 12 to calculate how much you spend each year on each item. Then write down any other annual expenses. Now have a good look at how you spend your money each year. Here is a typical list.

Mortgage / rent
Insurance
Electricity
Heating
Telephone
Internet
Car maintenance
Gas
Public Authority Bills
Grocery Store Food
Alcohol
Cigarettes
Fast food
House and garden
Clothing
Toiletries and Cosmetics
Hairdressing
Cleaning products
School Expenses
Medical Expenses
Entertainment / Socialising
Newspapers
Hobbies
Books and Magazines
Toys
Holidays
Gifts
Festivals
Special Events

Certainly you will find that some of this spending is essential. But other types of spending are unnecessary and could be cut back.. You need to eat. But you really do not need to buy those expensive snacks. Couldn't you make your own? You need clothes. But you do not need that expensive label. You are groaning. It is harsh. But you know it is true. Are you a slave to fashion or a slave to the marketing departments?

Once you have thought about each item carefully and recognised your actual spending patterns you are in a better position to take control of what you really need to spend money on based on your priorities in life. Okay, you can decide to give yourself some luxuries. But be aware that they are luxuries, not needs.

The single best rule of thumb is to avoid buying anything you had not planned in advance to buy. People who keep to this rule spend vastly less money than those who impulse purchase.

So, in summary:

Get to know how you spend your money.
Decide if that is really what you need.
Prepare your shopping list! And stick to it!

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1.Abraham Mazlow: A Theory of Human Motivation, 1943

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