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Spending - Head Matters


1. Evaluate a Purchase

c. Determine what your needs are vs. your wants

Understanding the difference between wants and needs goes beyond just deciding whether you want or need an item. Once you decide you need an item, be sure to think about what aspects of that item you want or need. You may need a new pair of shoes, but there are many different types of shoes and you’ll need to understand what you need from a pair of shoes (perhaps comfort and long-lasting) and what you want (maybe brand name). An important part of Erin’s decision about which bike to buy was determining what she needed in a bike and what she wanted in a bike.

Let’s look at Erin’s example again. This time, she clearly defines which aspects of the bike are a need and which are a want.


   Needs  Wants  
   Light frame
(under 20 lbs)
Comfortable  Nice Looking Cool Brand  Price
 Bike 1   X  X    $200
 Bike 2  X   X X  $650
 Bike 3  X X  X X  $1,200
 Bike 4  X X  X    $550

Erin decided that she would buy a bike that fulfilled both of her needs and that she could sacrifice one of her wants if the price was very different. Well, with a price difference of $650, Erin’s choice was easy—she chose bike 4.

Many different items can fulfill a need, it’s up to you to make informed decisions about which wants you’re willing to fulfill or live without and at what cost.  Always remember that a dollar you spend in one place is a dollar less you have to spend somewhere else or to save for something else in the future.  Realistically, most of us have a limited amount of dollars to spend.
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