(Editor’s Note: Yes, I know I said “if you can afford it.” It’s not a typo. Thanks for checking though.)
Today’s lesson is the second post in the tough love financial lessons series.
As you’ve probably guessed by reading the title, this lesson piggyback’s the first post in the series, If You Can’t Afford It, Don’t Buy It, where I talk about the importance of not going into debt (i.e., spending money you don’t have) in order to buy stuff. Understanding this first lesson is fundamental to improving your financial well-being in both the short and long terms.
That being said, the “If You Can Afford It, Don’t Buy It” lesson might actually be an even more important lesson in helping you maintain your financial well-being.
Needs Vs. Wants
The fundamental principal behind this lesson is understanding the difference between needs and wants. The fundamental example I use is food: you need something that is nutritional and fills you up, but you want to go out and eat a steak at a five-star restaurant.
A need is something that sustains you – food, shelter, clothing, etc. A want is something that is discretionary – either dramatically enhancing your needs (i.e. a 6,000 square foot home vs. a still very comfortable 2,500 square foot home), or something you would like to have but can very, very easily do without – a PS3, 65 inch TV, surround sound, etc.
Common sense tells us that just because we want something and can afford it doesn’t necessarily mean we should be buying it. Unfortunately, common sense doesn’t always win, and that’s why we blow a lot of money on stuff we want as opposed to stuff we need. And, when we decide we no longer really want the purchase, we just have something that takes up space in our home and leaves us with a case of buyer’s remorse.
Stop Buying Crap You Don’t Need
All too often, this what our want purchases come down to: buying something we don’t need just for the sake of buying something. Maybe you’re an emotional spender, maybe you buy stuff because you’re bored, or maybe you buy something simply because you like knowing that you can. Stop. All you’re doing is draining your wallet and filling your house with stuff you don’t really need.
One of my favorite sayings comes from Suze Orman, the well known common sense personal finance TV personality and author. She says: “Stop buy things you don’t need to impress people you don’t even like.” Incorporate this thinking more often when you’re out shopping and you’ll come home with a lot less stuff.
Don’t get me wrong, I’m not saying all want purchases are evil and forbidden. It’s okay to splurge every once in a while, but try to keep it to a minimum and make the amount spend something within reason.
Sleep On It
My favorite tactic for stopping “want spending” in its tracks is by sleeping on it. If I go into a store and grab something I want, I can’t buy it that day. Instead, I have to go home and sleep on it. If I wake up the next morning and still have an overwhelming desire to buy it whatever it was, I can. However, 99% of the time I either wake up and am glad I didn’t make the purchase or completely forget I even wanted to buy something in the first place.
It’s a great way to help you avoid buyer’s remorse as well as keep a lot more money in your bank account.
So, moral of the story: even if you can afford it, unless you can really justify the purchase, don’t do it.
What do you think? Leave your comments below and, as always, please help others by sharing this post using the social bookmarking buttons below – especially Facebook and Twitter.