It is easy to get caught up in the emotional side of shopping, but before you purchase the item beckoning you from the store-front window, consider this: can your budget afford the hit?
In 2010, the US census bureau reported that U.S. citizens have a collective total of $886 billion in credit card debt, hinting at of the demise of the household budget. So, before you reach for your credit card and risk overspending, find out how to evaluate want vs. need before turning to credit.
What is Want vs. Need?
In order to learn how to distinguish a “want” from a “need” you will need to understand the differences between each. Needs are costs or items necessary to live, such as home costs, transportation, food and basic clothing. Conversely, wants are items of which you can delay purchase or substitute for something less expensive. Eating out, new clothes beyond basics and home décor can easily break your budget and lead to overspending – and high credit card balances down the road.
How to Separate Want vs. Need
When making purchases, asking yourself why you need the item will help you distinguish between something you want to buy and something you need to buy. Before reaching for your wallet, are you replacing a damaged pair of boots or are you eyeing the latest styles? When you really take a look at the motivation for making purchases, you may realize you do not actually need the item after all.
Evaluate Your Budget to Avoid Overspending
Prior to making purchases, take a good look at your finances and gauge how your new purchase will affect your budget. Will you still be able to meet your other financial obligations without dipping into your savings account or turning to your credit card? Overspending on something you want but do not necessarily need may make it tough for you to cover your monthly obligations as well as snowball into overwhelming credit card debt.
With a little practice, evaluating wants vs. needs before turning to credit gets easier over time, and helps you avoid incurring high credit card debt. However, instead of depriving yourself of every single want, consider setting aside a portion of your budget each month devoted solely to discretionary purchases. By indulging in a little entertainment, treats and leisure activities each month, you may curb your urges to splurge on wants, while still covering your needs.