How to Distinguish Budget Needs Vs Wants

The number one reason that so many people fail at budgeting is that they fail to recognize the difference between 'needs' and 'wants' when spending.

It's human nature to want to have what we want now, rather than waiting until we can pay for it in cash at some time in the future.

The mass marketing industry plays on this human instinct by providing society with every reason in the world why it makes sense to "Buy Now, Pay Later!". It is their job to convince us to reach down and open our wallets and pass our credit card over to the sales person.

What's so amazing is how effective marketers are at doing this on a regular basis. Not only do they allow us to rationalize our poor spending habits, they go even one step further - they enable us to actually feel good about buying the things we can't afford!

Temporarily, that is, until we receive the credit card statement! Only then does reality sink in. At this point the guilt and shame set in. For many, it's now time to take our minds off our troubles - so what do we do? We go SHOPPING! ... and so the cycle goes around and around.

Eventually we are forced to face the financial mess we've created. By this time, we've run up a huge amount of debt and credit collectors are calling on a regular basis.

So how can we stop the madness before it ever gets to this point?

You must clearly understand the difference between 'needs' and 'wants'. The most common thing that happens is that people decide to buy "NEW" versus buying "USED", or not buying at all. How easy it is to convince someone that buying new is really the best choice because of the "longer lifespan' of the item, the "extended warranty", the "less cost to service", the knowledge of being the "sole owner", etc.

While the above benefits may or may not be true, the reality is that if you don't have enough cash to pay upfront for the newer item, then you should not be buying it. Sounds too simple, right? In reality, it's not simple at all - because you really want to buy the new item and not the used one.

Awareness of this important issue in critical to your budgeting success. You must understand the true difference between needs and wants.

Another mistake people make is that they choose to buy, spending more money than they actually have on hand, when they could have rented until they have the cash available to purchase the item outright.

In addition, rather than paying the service fee to fix an item, consumers are too often coerced into buying a newer item based on the argument, "Why would you continue to throw good money after bad by fixing it, when you can just replace it?"

The simple answer is, "Because I don't have the money!"

Awareness of the many marketing techniques used by sales professionals to mold your decision making will help you to recognize these pitfalls before laying down your plastic and running up additional debt.

While there is absolutely nothing wrong with having a goal to obtain, and want, a luxury item - you must learn to clearly distinguish the difference between wanting something and actually needing it. If you can do this consistently, your success at budgeting is guaranteed.

About the Author: Richard Gorham says, "Conquer debt and increase your income!" Access a wide variety of free tools and resource information to better manage your money. Learn how other people are creating new income at http://www.debt-to-income.com.