Needs or Wants? Find out the Difference!
Congratulations, without realizing you have been building a strong foundation and enriching yourself with knowledge about investing by reading through articles available on Moduit website. For you who have just about to start investing, as advised by financial planner, allocation for investment from monthly income is around 10%-30%.
‘I Spent My Monthly Income for Monthly Needs with Nothing Remains’
Are you facing the same problem? If yes, let’s follow below process:
- Firstly, you could note down all your expenses within a month.
- From this note, you could identify expenses that could possibly be reduced so you could have more fund to be allocated to be invested.
- Do you still have no remaining fund for investment? Don’t worry! Keep reading through this article as we have tips for you 😊
‘Is this Needs or Wants?’
This question could help you further to identify which expenses could be reduced. Do you feel all your monthly expenses are needs? Are you sure? To further ensure you, you could follow 2 tips below:
- Differentiate between needs and wants
In general, basic needs of an individual can be separated into 3 categories: food, clothes and shelter. However, don’t just stick to these 3 categories. The thing that you might think is needs, could also be wants. For example, food is one of your basic needs since you need food to survive. However, to fulfil this need of food, you could eat a simple meal at home or an expensive restaurant. From this example, eating in an expensive restaurant can be categorized as wants.
Interesting, isn’t it! Both are categorized as food, but there is some differentiation that could make one as needs or wants. Therefore, you could take a look at your expenses and re-analyze them.
- Ask these questions to yourself
If you are still confused in differentiating between needs and wants, you could try asking the following questions to yourself:
- Do you need the stuff at the moment?
If the answer is yes, that means it is needs. However, if the answer is no, then you could categorize the stuff as wants instead.
- What will happen if you could not get the stuff at the moment?
If the answer is unwanted event might happen, then you could consider the stuff as needs. However, if nothing will happen even if you don’t get the stuff, that means the stuff is wants instead of needs.
- Is there any substitute items that could be purchased to fulfil your needs other than this specific item?
If the answer is yes, then you could consider this item that you are looking at the moment as wants and for the next step you could repeat the process from the beginning by asking the first question to yourself in regards to the substitute item.
These 3 questions could also help you in checking the urgency level of the specific needs and it can help you in planning and prioritizing your expenses.
After being able to differentiate between needs and wants, you could find it easier to start planning for your expenses. You could also identify needs and wants and reduce the expenses that is categorized as your wants, so those expenses can be postponed and the fund can be allocated to be invested instead.
Let’s try following the above-mentioned tips and start investing through Moduit application!