Posted on July 18, 2009 - by musicwhiz

Personal Finance Part 13 – Differentiating Between Needs and Wants

Photo by striatic

So much has been said about personal finance in my previous write-ups and postings, but the key issue which I had mulling about is how we, as humans, classify our possessions and services which we use. Each person has his or her own unique perspective and upbringing and therefore no one person will view “needs” and “wants” in a similar manner. That said, in affluent Singapore, which is one of the richest and most prosperous countries in South-East Asia, the distinction between needs and wants is slowly but surely blurring. This post is to explore underlying beliefs of mine as to what constitutes needs and wants, and how we can build a comfortable nest egg to achieve our retirement financial goals.

In a basic Maslow’s Hierarchy of Needs chart, needs are made up of basic security needs and food and water (subsistence), which half the world does not really have adequate amounts of. In Singapore, we are much luckier than the average human being in that we have plentiful amounts of food, drink and shelter; thus we can theoretically move on to a “higher plant” on Maslow’s hierarchy, exploring issues of esteem and self-actualization. Now that we have got past the basic issues in life, we tend to yearn for something extra to improve our quality of life, and this translates into possessions which used to be “wants”, but gradually became recognized as “needs” as society progressed.

Some examples of “wants” which are not viewed as “needs” include a personal computer (PC), handphone, iPod, iPhone and television. Some may even throw in a car as a necessity, even though Singapore is arguably one of the smallest countries around (we are referred to somewhat condescendingly as a “tiny red dot”). The reason for the upgrade in perception is because these items (mainly gadgets I may add) have elevated our lifestyles to such comfort and convenience that we have become accustomed to it; and once human beings reach a level of comfort, they are unlikely to want to give it up and revert to a “simpler” and more basic way of living. This fact is probably the single most pervasive reason why people tend to upgrade their lifestyle and not downgrade (unless compelled to for financial reasons). Another reason is Asian’s issue of “face”, whereby one would perceived to be looked down upon if one had to downgrade or live a life more devoid of possessions than someone else. Read more…

Related posts:

1. Personal Finance Part 16 – The Measurement of Wealth
2. Personal Finance Part 15 – The Evils of Gambling
3. Personal Finance Mistakes To Avoid