Understanding the game of needs and wants

We often use the words ‘need’ and ‘want’ interchangeably. Say for instance, if someone wishes to own a particular car, he/she may say “I need this car” and some may say “I want this car”. By need and want, people usually mean the same. Even though both the words sound similar in meaning, but there is a big difference between them that can potentially change the entire use of these words while making major decisions.

Need is something that you require and cannot compromise on the same. Examples of needs are day to day expenses, child’s education, saving for retirement, medical expenses, etc. You cannot compromise on them and neither can you defer them. On the contrary, want is something that you desire to have but if not fulfilled, then will only bring disappointment, but won’t affect your survival. Examples of wants are to go for a vacation, buy an expensive car, etc. These can be deferred to future date. So, there is a whole lot of difference between needs and wants.

While financial planning, it is important to know the difference between both of them. This will help you understand where you are spending and where you are splurging. Even there is a lot of difference between spending money and wasting money. Say for instance, if you wish to buy something which you don’t require and is just meant to sit idle at some corner, then that leads to wastage of money. On the other hand, spending is the exact opposite. So, if in case you have certain things that you are not using for a long time then you may consider selling it on various platforms such as OLX. This will not only help you to de-clutter your home but also to get some money out of it which you can invest for your financial goals. This suggestion is not limited to expenses but is also for the steps taken towards meeting your financial goals. So, always divide your financial goals between the needs and wants. This will help you to have a clear focus while managing your overall financial plan.