The secret to becoming rich is determining what the difference is between your needs and your wants. Actually, becoming rich revolves around spending less than you make. It is that simple. To do this, you need to separate needs from wants. First, needs and wants are not the same thing. Think about it. Your five year old may say he needs a soda pop, but you know better. But while you know there is a difference, you probably don't put it into action for yourself. You've probably told your self that you need certain things, when the truth is that you only want them. New shoes, clothes, jewelry, a car, eating out. These are all wants. Not needs. Take time to really look at your lifestyle and assess what your true needs are. For example, is your television a need or a want. While you can say it is necessary, you'd be shocked to find that it isn't. It is a want. You don't need digital cable, satellite dish network, the DVD player, the pay per view movies. They simply aren't necessary. Nice, but not necessary. Some things aren't black and white. You might actually need a newer vehicle for your familial or work demands. You might not be able to work from home without a computer, while others don't need a computer. But you are able to make generalizations as to what are and what aren't needs. Needs usually include clothing (reasonably priced), water, bed, car, food, medicine and basic furnishings. You don't have to wear name brand clothing, but clean clothes are helpful in life. The items that are in the gray area include a larger home, computer, cellular phone and newer vehicle. These depend on your circumstances. Designer bags, ice-cream, candy, lottery tickets, entertainment, vacations, jewelry, coffee every morning and other luxuries are simply not necessary. But you aren't cutting out everything you love. You are simply cutting out the things you can't afford. By cutting out the wants, you are able to live within your means. All you have to do is ask yourself if it is a need you are looking at or a want. When you list out your monthly budget, list your bills and needs first. Include your savings contributions at the top of your list. The extra spending money you have each month can be spent on wants. After all, we all need to treat ourselves every once in a while. But ask yourself if how you plan to spend the money is wise. You might find that saving it for something later will help fulfill a future need, such as retirement funds. By knowing the difference between wants and needs, it will be easier to make wise money management decisions. |
