Determining Wants vs. Needs to Reach Financial Independence

tiles that spell money surrounded by currency

Here’s something we can all agree on: it would be nice to save more money. But you don’t necessarily have to earn more in order to save more.

Even more powerful than earning more is spending less. That is because learning to spend less is doubly effective: it increases the amount you save and reduces the amount you will need to live off of during retirement. Determining needs versus wants on a daily basis can help you achieve financial independence easier and faster than you ever imagined!

Make a List

It can be difficult to distinguish between wants and needs. The easiest way to do this is to examine your daily spending by making a list of everything you spend your money on each day. Give your list two columns and designate each purchase as a want or a need. Have your spouse or person you share money with do the same. It can be eye-opening to understand that each person has their own definition of wants and needs. Where do you not see eye-to-eye? Why? Talking about the discrepancies and deciding if you need to come to a compromise can help eliminate frivolous spending.

Digging Deep

Even spending that we designate as a need can be optimized further. A grocery bill can seem like a need since food is a necessity, but reviewing your itemized grocery bill will reveal the expensive snacks, alcohol, or specialty items that you bought to treat yourself. Reducing those expenses can help you optimize your spending and save more.

It is also helpful to dig deep into your emotions about luxury spending. Do you consider new cookware a need because of its function in your home, even though your old cookware was still usable? Perhaps you have a sincere attachment to upgrade or treat yourself because you “deserve” it. In reality, much of what we buy we could survive without.

Closely examining your spending and determining needs versus wants can help you spend less, save more, and achieve financial independence. We Florida Financial is here to assist you in all things regarding money and wants you to have the brightest financial future!