Have you ever heard someone say how much they “need” something that is a complete waste of money? They need their gym membership, they need their SUV, they need their daily latte. We all know that it is a want, but it is an important psychological issue to understand.
My Friend with the Gym Memberships
I have a friend who came to me for financial advice. That happens regularly, so we went to lunch to discuss her situations. While eating sushi (she had more than $20 in sashimi, in case you were wondering), we discussed her “need” of a new Mercedes SUV and her four gym memberships.
Read that last sentence again. Take a minute to soak it up. Four. Gym. Memberships.
And she is convinced she needs them.
When discussing this, she explained that certain trainers only work at certain gyms. I said, okay, so just belong to that gym. The workout nut she is, she thinks she needs multiple trainers with different specialties and needs to belong to multiple gyms near work and home. That adds up quick.
The average gym in the Denver area costs $30-$40 per month. Paying for four of them costs $140 per month. That is $1,680 per year!
Cable TV
When people ask me how I can afford to do some of the things in my life, I tell them that I cut wasteful spending to focus the money on places I get more value. The first thing I mention is cable. I got rid of the cost (and hassles) of Comcast in February, 2011. I have saved $1,190 in that time.
When I tell people that I saved enough money cutting cable to buy a roundtrip flight to Europe, they say “I could never live without cable.”
I promise every single person, you will not die if you cancel cable TV. In the time since I got rid of cable, I have been more active and involved in more community and social activities. I didn’t die. I just saved a bunch of money.
Designer Clothes
I was talking to a different friend about her financial situation recently. Using Mint, we found that she spent over $200 every single month on clothes, usually closer to $300.
She said she “needs” those clothes for her job and social life. I know women’s fashion is much different than men’s, but I probably average closer to $30 per month on clothes. Even doubling that to $60, I am sure she would be just fine.
Evaluate Your Spending Habits
I know that I spend money on wants regularly, but I work hard to make sure I am not wasting money on stuff that doesn’t give me value. If you are doing well financially, saving over 10% of your income for retirement, and have no debt, no one should judge you for having four gym memberships. However, if you are on shaky financial ground, it is important to evaluate your spending to find places to save and divert your money to places where you get more value.
What places have you cut spending that was a “need” but you realized was a “want?” Where have you saved on spending to divert your money to more useful places? Please share in the comments.
Image PrecisionAthletics/flickr
This reminds me of the extremely frustrating argument that ensued on a local forum when I told people to stop whining because internet is also a WANT not a NEED and that when it comes down to it, if you don’t have money… food is more important than access to internet. The responses I got were ridiculous, these people have their head stuck in the mud. When I got a little crazy with my budget I cut clothing spending, restaurant spending and pretty much all discretionary spending. Currently I’m still considering cutting out my homephone, my cellphone is paid for by work and I really don’t use the homephone… I haven’t paid for cable television in 4 years either, as long as I have the internetz! (Though even that, is still a WANT, not need)
I have not had a home phone since I stopped working for the phone company. I think it is crazy when people are struggling to buy food for their family and they go get an iPhone. Smart phones are not a need, they are also a want.
Everything is a matter of choice! I only need air, water, food, clothes and shelter. Everything else is a want. I used to have a (roughly 12 years ago) gym membership and I now have a home gym. It is much more convenient and a lot cheaper. Yes, I do use it daily or multiple times weekly. I think it take a frame of mind that wants to make changes otherwise the information is lost on the individual.
I think you get the difference between want and need. If you will die or go to jail without it, it is a need. Otherwise, it is a want.
How do you convince someone else that what they see as a need is a want? How do you get them to come to that conclusion?
You have to be very clear about defining a want. She would not die, starve, or go to jail without a gym membership, so it is a want.
I recently got a new phone contract. It’s an upgrade and by refusing the “free phone” I was able to halve my contract monthly fees and double my minutes at the same time. Nothing is for free!
That’s awesome! Way to be smarter about the long term contract. Did you have to pay more for the phone? Did the amortized cost beat out the contract savings?
A lot of these suggestions hit the brick wall called “wife and kids.” Luckily we made it out of debt without having to get crazy. Funny that someone thinks NOT having 4 gym memberships is crazy.
Lucky for me, being single makes it easy. But I won’t be single forever. Having a wife and kids will change everything!
Nice. I wrote an article on how this can be subjective back in Feb. for Miss T at
http://prairieecothrifter.com/2012/02/needs-vs-wants-which-is-which.html
Not sure if I agree totally on the subjectivity. Just because someone disagrees on what is a “need” doesn’t mean they are looking at it with the right perspective. Need = life and death. Everything else is a luxury or enhancer. I am not saying to get rid of all wants, but it is important to recognize the real difference.
Its interesting that even certain needs can be wants (like food and shelter). We need to eat, but don’t need to go out to eat for numerous meals throughout the week. We need shelter, but this too can quickly become a want.
I agree with your last paragraph – Identifying our wants vs. needs, providing value with our finances, and buying what we can afford is key to personal finance. Without this, one is lost in the wilderness.
You make a good point. We need to eat, we don’t need to eat fancy food. We need water to survive, we don’t need bottled water or pop. It is all about understanding the fundamental needs vs. wants before moving on to other places and knowing how to cut back on the luxuries we don’t really need.