Managing your personal finances can be tricky, especially when it comes to distinguishing between needs and wants. It’s essential to understand the difference between the two and how they can change as you grow older and your circumstances change.
Let’s define what needs and wants are. Needs are essential things that are necessary for our survival and well-being, such as food, shelter, clothing, and healthcare. Wants, on the other hand, are things that we desire but are not necessary for our survival, such as luxury items, entertainment, and fashion items.
It’s crucial to understand the difference between needs and wants because it can impact our financial decisions. If we prioritize our wants over our needs, we may end up overspending and not having enough money to cover our essential expenses. This can lead to financial stress and even debt.
It’s important to remember that what you consider to be a need or a want can change as you get older. For example, as a teenager, you may want a car to roam around with friends, but as an adult, you may need a reliable car to get to work.
Similarly, your needs and wants may change depending on your situation. If you are going to the office 5 days a week, then a car may be a need. But if you Work From Home (WFM), then a car may be a want. For instance, if you stay in a city (like Gurugram) where public transport is poor, then a car may be a need, whereas if you stay in a city (like New York City) with good public transport then a car may be a want.
In conclusion, understanding the difference between needs and wants is crucial for managing your finances effectively. Prioritize your needs, budget your expenses, and save money regularly. As you grow older or your situation changes, make sure to adjust your priorities accordingly. These habits will help you build a solid foundation for a financially stable future.