Are you spending on needs or desires?
By James Abola
Does having and implementing a personal financial plan mean going through life with a long face, while donning the proverbial tight belt? The thought of living within one’s means is not entirely palatable. At times it means choosing not engage in debt driven consumption in order to save for the future.
One time after talking to a gentleman about developing a personal financial he invited me for lunch. My response that I could not have the lunch because I had carried my food from home did not rub him well. He turned to me and said “James people like you who carry chapatti from home for lunch are not good for economic growth, how do you expect people whose business is to sell lunch to prosper if their food is not bought?”
I found his justification of free spending very interesting. I would love to conduct a survey to find if the many people who spend money as if their pockets or handbags have been hired by De La Rue are actually being that charitable to the economy.
A lady I talked with recently asked if I really believed that people’s personal financial habits could be simply changed by giving them information. Working as a Human Resource Manager this lady was vexed by the financial recklessness regularly exhibited by employees in her organisation. I am sure you will agree that a person who has a salary loan from a bank, a loan from a money lender, a salary advance and outstanding rent all at the same time must be financially reckless.
I believe acquisition of personal financial knowledge is essential for attainment of financial security and independence. One area where we need to get knowledge is to be able to differentiate between needs, wants and desires.
Needs refer to those things that are essential in life. Needs include food, clothing, shelter, health, education and transportation. These items are essential to living and you have to spend money to acquire them for self and family.
Wants refer to choices we make about the quality of needs. Most times wants are simply higher quality needs. Although at times it is more to with more expensive needs. Going back to my chapatti friend – both of us were agreed on food as a need. The difference was in our approach to satisfying the need, which would result in different costs. He wanted to buy lunch from a restaurant while I preferred to carry it from home. The choice between a modest Toyota saloon car and a Ferrari moves you from the realm of needs to wants. When I choose to get shoes or clothing from a designer shop then I have shifted from needs to wants.
Desires are everything else that is neither a need nor a want. A large TV set, a gold necklace, holiday in Dubai, the phone with an ability to send and receive pictures are all desires. Desires are what are commonly used to trap us into spending. When a desire is flashed on the TV you feel you can’t wait or if a neighbour has something you desire you must also get it. Then there is the ultimate trap you deserve it!
Some desires are God given as a result of your unique character – some people have the desire for hanging out. However legitimate a desire may be you have no right to fulfil it unless you can afford to do so.
We also need to understand that it is the satisfaction of desires that bring happiness. So while you are focused on spending money on only true needs, it may help to identify a few meaningful desires to spend on as well. Spending on a few meaningful desires will actually help you stay the course of a proper financial plan.
The economies with the highest savings level are in Asia. Asians are well known for their frugal way of living which is translated into savings and investments. Most of the Asian frugality is learned at the family level. A friend, we shall call Simon, who studied with a gentleman from Pakistan told me story that perfectly illustrates the point.
Simon loved to dress well and acquired different shades of polo necked T-Shirts. His Pakistani colleague couldn’t understand Simon and one day took him by the hand led him to his room. He went on to point out the 6 polo necks, Simon had acquired and asked “Simon are you mad? Why must you buy half a dozen polo necks and what will you do with them when you get back to Africa?”
Given the cold European climate Simon’s colleague reasoned that even one polo neck would suffice. He clearly understood the difference between a need a want and a desire.
The writer provides financial knowledge to individuals and businesses and can be reached on jhabola@yahoo.com, Tel. 071472109.
Does having and implementing a personal financial plan mean going through life with a long face, while donning the proverbial tight belt? The thought of living within one’s means is not entirely palatable. At times it means choosing not engage in debt driven consumption in order to save for the future.
One time after talking to a gentleman about developing a personal financial he invited me for lunch. My response that I could not have the lunch because I had carried my food from home did not rub him well. He turned to me and said “James people like you who carry chapatti from home for lunch are not good for economic growth, how do you expect people whose business is to sell lunch to prosper if their food is not bought?”
I found his justification of free spending very interesting. I would love to conduct a survey to find if the many people who spend money as if their pockets or handbags have been hired by De La Rue are actually being that charitable to the economy.
A lady I talked with recently asked if I really believed that people’s personal financial habits could be simply changed by giving them information. Working as a Human Resource Manager this lady was vexed by the financial recklessness regularly exhibited by employees in her organisation. I am sure you will agree that a person who has a salary loan from a bank, a loan from a money lender, a salary advance and outstanding rent all at the same time must be financially reckless.
I believe acquisition of personal financial knowledge is essential for attainment of financial security and independence. One area where we need to get knowledge is to be able to differentiate between needs, wants and desires.
Needs refer to those things that are essential in life. Needs include food, clothing, shelter, health, education and transportation. These items are essential to living and you have to spend money to acquire them for self and family.
Wants refer to choices we make about the quality of needs. Most times wants are simply higher quality needs. Although at times it is more to with more expensive needs. Going back to my chapatti friend – both of us were agreed on food as a need. The difference was in our approach to satisfying the need, which would result in different costs. He wanted to buy lunch from a restaurant while I preferred to carry it from home. The choice between a modest Toyota saloon car and a Ferrari moves you from the realm of needs to wants. When I choose to get shoes or clothing from a designer shop then I have shifted from needs to wants.
Desires are everything else that is neither a need nor a want. A large TV set, a gold necklace, holiday in Dubai, the phone with an ability to send and receive pictures are all desires. Desires are what are commonly used to trap us into spending. When a desire is flashed on the TV you feel you can’t wait or if a neighbour has something you desire you must also get it. Then there is the ultimate trap you deserve it!
Some desires are God given as a result of your unique character – some people have the desire for hanging out. However legitimate a desire may be you have no right to fulfil it unless you can afford to do so.
We also need to understand that it is the satisfaction of desires that bring happiness. So while you are focused on spending money on only true needs, it may help to identify a few meaningful desires to spend on as well. Spending on a few meaningful desires will actually help you stay the course of a proper financial plan.
The economies with the highest savings level are in Asia. Asians are well known for their frugal way of living which is translated into savings and investments. Most of the Asian frugality is learned at the family level. A friend, we shall call Simon, who studied with a gentleman from Pakistan told me story that perfectly illustrates the point.
Simon loved to dress well and acquired different shades of polo necked T-Shirts. His Pakistani colleague couldn’t understand Simon and one day took him by the hand led him to his room. He went on to point out the 6 polo necks, Simon had acquired and asked “Simon are you mad? Why must you buy half a dozen polo necks and what will you do with them when you get back to Africa?”
Given the cold European climate Simon’s colleague reasoned that even one polo neck would suffice. He clearly understood the difference between a need a want and a desire.
The writer provides financial knowledge to individuals and businesses and can be reached on jhabola@yahoo.com, Tel. 071472109.
Hello James,
ReplyDeleteYou are providing a very good service. I'll be in touch to find out if you can give a few money saving tips to my daughter who buys, buys and buys.
May I join the discussion by commenting on the story?.
As far as Simon's story is concerned, I think that a single person in Europe does need a few polo-neck tops if they are not to be wearing smelly clothes, or be doing their laundry every other day. With six such tops Simon could (I can imagine) wash three tops a week and spend the rest of his time studying and doing other things.
I know of friends and colleagues who, when in the UK in the 1980s, ruled out buying woolen clothing of any kind because they were too hot for Africa!!! As a result, their heating bills were always high, they were always very cold during winter and not comfortable in Spring & Autumn. They faced many other inconveniences too. Therefore, I feel that while it is good to save and keep to one's needs, Simon's half a dozen tops were both for need and desire.
Thanks for the wonderful blog.
Lamego mo.