Do you know the difference between ‘want’ & ‘need’?
Want – Is something that we desire. It is usually intense and it comes about internally. Yet, we ourselves are not sure what is the cause of such desire. It is normally mixed & convoluted with other feelings such as ego, self-esteem, vanity, etc.
Need – Something practical that we will use or benefit from. Usually quite detached from internal feelings (ego, vanity, etc) and mostly driven by external factors. e.g. I need a car to drive to work because I have to wait 2 hours for bus.
In any written books about financial management, the ‘want’ vs ‘need’ will surely be brought up. You will not be able to manage your money if you can’t manage your own ‘want’ (desire). A good management on personal finance will ensure a stable and happy life for you & your family. And the happiness I talk about is not the mere joy of getting a blackberry from your elder sister or your father giving you a new video game. It is the joy of knowing that you are secured & stable, living in a home that will never be taken away (fully paid off loan) and buying grocery (necessity) without worrying that you might not be able to buy it next week as you have run out of money. I used to date a girl who did just that. She signed up for expensive gym package with monthly installment as high as USD 50 but yet, am not able to pay for next month electrical bill. Which is more important? Gym or electric? I am sure you can guess why we broke up. This woman will bankrupt me if we get together!
In our modern world, the perils of ‘want’ is everywhere. It’s like a devil just lurking by the next billboard or the next advertisement. Yes, the power of marketing. Marketing has this magical influencing power to create a desire out of anyone’s targeted. Can you remember the last time you wanted to buy something, and yet that gadget is really something totally useless? What do you feel after you see an advertisement showing beautiful faces running down the beach and being happy together with friends, only to sit down and took out an iPAD 2 to call their mum? This is the power of association. Can you see that the advertisement is trying to associate a happy & carefree life (running at beach with friends) and being a good daughter (calling mother) to the product iPAD 2? What would you feel after watching this commercial? You will like iPAD 2 because the action of being happy and being a good daughter resonates with you. The advertisement is trying to trick you into believing that if you owned an iPAD 2, you will have a happy life & will be a good daughter. How stupid does that sound? Yet, so many are being tricked daily. Marketing has this powerful ability to associate the product with that your heart wants. Very very smart people have done countless research to come up with such campaign. Such advertisement campaign will definitely create a desire within you to purchase the product. Sometimes so powerful, that we lost the sense of value in us. For example, how much can a simple bag, which sole purpose is to carry items cost? Well, a Louis Vutton can cost up to USD 4000. Isn’t that ridiculous? Well, it is an accumulation of advertisement and endorsement by celebrities and royalties over many many years that give LV the esteem today.
Now having said all these, I am not saying that advertisements are useless. It has its purpose and I myself go for branded stuff sometimes. I am just saying that we have to be rational if we are to make a wise purchasing decision. I think our buying impulse must first be driven by ‘need’ (practicality), followed by budget (cost) and lastly ‘want’ (desire). For example, I have recently bought a house. First of all, I need a house to build my planned family (practical). Then I put up a budget of around RM 400k in my mind (cost). Lastly, with this budget, I look at a few branded developers and decided I shall go for Bukit Indah.
I could imagine it going the wrong way. First, I need a house. Then, I want to buy the famous ‘Horizon Hills’ by Gamuda Land. Then I check that their price is RM 600k. Because I have set my want before my budget, my desire to own Horizon Hill will be so strong that it will overcome my budget rational. I would have wasted RM 200k more on my first house purchase. And if I did that, I would have never been able to purchase a second house within a short time.
As smart consumer, we must be constantly aware of what advertising is doing to us. Our decision should be rational and not emotionally driven by what the advertisement potrays to us. If an iPAD is not much use to you, you must decide that it will never be useful to you, no matter what the advertisement say. Sometimes, if you put too much emphasis on your desire (want), you will totally forgot about your budget (cost) and this is very dangerous. I was once very angry with W for wanting to video call with me so much that she irrationally forgot about her own living expense. If this happened in a family, can you imagine how the kids will suffer without food? Anyway, to sum up, I prepared a list of ‘wants’ vs ‘needs’ below:-
Wants – video games, shopping, new phone, eating outside, watch movie, camera, branded shoes, bags, cosmetics, perfume, car, new clothes, mp3 player, extra tv, speaker set, home renovation, traveling, etc…
Needs – basic phone, basic computer, education, books, work clothes, bag, shoes, grocery, food, home, savings, etc etc