Stick to needs for budgeting success

Talking about your purchases as wants and needs helps determine how badly you want to have something.
If you must have something in order to survive, then I would class that as a need. Food, clothing, shelter and love are needs and everything else is really a want.
Many wants are based on an emotional viewpoint whereas most needs come from a survival viewpoint.
Problems occur when spending money on wants causes over-spending, which in turn means we are unable to pay things such as the power bill, which would be classified in the need category.
To evaluate the importance of a buying decision, you need to be able to tell if what you are about to spend your money on is a need or want.
This part of the decision-making process can save you from spending money on things that really are just satisfying an emotional gap.
There is nothing wrong, of course, with buying wants if you have the cash to do so and you have planned for it in your budget.
In our modern society, wants and needs have become confused. Talk about wants and needs with your family and discuss items around your home and categorise them as a need or a want.
Become aware of how you speak about things you would like to have. If you are continually saying "I need this" or "I need that" then your subconscious kicks in and you may buy things you really just want because you think you need them.
Some of the items that appear as wants may in fact be planned for, and paid for, with cash, which is great - so point that out. The lesson to learn is how to tell the difference between needs and wants.
It is the purchasing of the wants without due thought and planning that can cause financial difficulty.
Consider this: is a fridge a want or a need? Try this exercise - ask your family "is a fridge a need or a want?" Most people say it is a "need" and give well-thought-out reasons why a fridge is a need. Now get them to close their eyes and imagine that you are living in Japan and a Tsunami hits and you escape with your life. Now ask yourself - is a fridge a want or a need? It really is a want. I would put it high on the list of wants, but you could live without it if you had to as my parents did when they were first married.
Sylvia is the author of How To Stop Your Kids Going Broke which is available from Silbo.co.nz. She is also the author of The New Zealand Household Budget Kit which is available through all major bookshops.