Knowing the difference between needs and wants

In order to manage your household finances and
your budget properly, you must make sure that the
most important things in your life—your needs—are
taken care of before you begin to start to think
about taking care of your wants.


Sometimes, it is
hard to tell the difference between needs and wants
because certain things which were, at one time
considered luxuries, are now today seen as needs.

Let’s define these words:
What are needs? Needs are things that you must
have in order to survive. Your basic needs are
food, clothing, and shelter, but can also include
items which you must have to be able to make a
living, such as reliable transportation to and from
work, personal care expenses and electricity.
To find out if an item is a need or a want, stop and
think about where that item stands in your life. If
that item were taken away, would you be able to
survive? Would you be able to provide for yourself
or for your family?
Wants; on the other hand, are things that make life
enjoyable but are not necessary for survival.
Sometimes, it is easy to confuse wants with needs.
For example, you can tell yourself that it is okay to
buy a bigger house than you can comfortably
afford because shelter is a need. However, when
you think about, you will probably see that a
smaller house will fulfill your need for shelter —and
also help you stay out of unnecessary debt!

The same is true for other items. Will a cheaper
mobile phone allow you to make all the calls that
you need to make? These are questions that you
need to ask yourself and answer honestly before
you spend money on things that you think are
needs but are really just wants.
Now, this does not mean that it is wrong to spend
money on wants?

No, it is not necessarily wrong to spend money on
the things you want but may not need. In fact, the
comfort and convenience of wants can add to your
quality of life. But the reality is that not
everybody’s income can cover all their wants, so
choices have to be made – but those choices
should be made only after all needs have been
taken care of.

Knowing this important difference between needs
and wants helps you to make the right decisions
when a financial emergency arises. It will help you
manage the cash that you and your family have
available at any given time and give you true
financial freedom.

This has been courtesy JAIZ Bank as part of The
Bankers Committee Financial Literacy Public
Enlightenment Programme brought to you by The
Bankers Committee, comprising all the commercial
Banks in Nigeria and the Central Bank of Nigeria,