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Money Management - Heart Matters


3. Wants vs. Needs

Being able to manage your money effectively depends in part on being able to dispute irrational beliefs.  It also depends on you being able to distinguish between "needs" and "wants." 

Loosely speaking, needs are things you must have and wants are things that would be nice to have. We put needs on the top of our financial priorities because needs are necessary for our survival. Wants are a lower priority because they’re not absolutely necessary for survival. Have you ever sabotaged your personal financial plans by confusing wants with needs?

Let’s examine more closely how we change wants to needs by creating irrational beliefs that often cause financial ill-health.

According to Dr. Albert Ellis, we are born with strong biological needs for love relationships and for close family relationships. When these relationships are threatened, we create irrational beliefs to meet these needs. Our irrational beliefs are designed to keep us safe.

Here are some examples of irrational beliefs we create when we don't have safe and loving relationships in our lives.  “I must be successful,” “I must be approved of by all,” and “My life should be fair and easy.”  We develop these beliefs because our inborn needs for love, approval and social relationships are so strong. 

Human needs are closely linked to your relationship to money, stress, love, and self-worth. Needs energize and motivate us to use money to satisfy them.  If we camouflage wants as needs, we can “need” many more goods and services than we have money for. And, you know what that leads to—you got it—continuously, increasing debt.

Why is it so easy to camouflage wants as needs? We can confuse what needs are necessary for our survival with wants that may seem important but primarily just make us feel good.

The needs we discuss were defined by Abraham Maslow in his Hierarchy of Needs.  Many of you have likely heard of Maslow's hierarchy.  We won't go into the details of his theory and the hierarchy here, but we will briefly describe each category of needs.

The physiological needs are what we have to have to survive.  These include things like food, shelter, sleep and other items that are important for our survival. 

The safety needs are not necessary for survival but they are what we need to feel secure and safe in our lives, and they need to be in place for us to thrive.  These needs include things such as a safe living environment, employment, knowing our family is safe, and property. 

The love/belonging needs include friendship, family, and intimacy.  These needs are not necessary for survival, but because human beings need to have relationships, fulfilling the love/belonging needs is important for our happiness. 

The esteem/ego needs are also important for our happiness, and when these needs are met, we tend to have good mental and emotional health. We are more likely to succeed in our jobs and relationships when these needs are met. They include self-esteem, confidence, respect by others, achievement. 

And finally, the self-actualization needs go beyond survival, safety, and happiness.  We tend to feel these needs more internally.  They make us feel like mature adults with good self-awareness.  These include morality, creativity, problem solving skills, lack of prejudice, self-awareness. 

Keep in mind, we often confuse which needs go in which category.  We'll show you how that can happen using the exercise on the next page.

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    • Dr. Albert Ellis
    • Heirarchy of needs

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