If you are always struggling financially by the time the end of the month comes it may be because you are getting your wants and needs mixed up. Often people say, “I NEED that [insert item name here] when in point of fact it is something they WANT instead.

Our needs are very simple. We need food, clothing and shelter. Everything that falls outside those three categories are wants. Still, having said that it is easy to feel like you desperately need something.

A financial writer by the name of David Bach calls this phenomenon “the latte factor,” because it refers to things which most people would consider frivolous. So, why do we continue to want them so much? Good question.

When I was knee-deep in my BPD pathology, I got these two things mixed up all the time. I ended up doing a lot of “retail therapy” which means I shopped til I dropped or until my credit card was maxed out completely. When I finally woke up I realized that I had shopped us into more than $40,000 of credit card debt. Big wake up call time PLUS!

What are true needs?

On the list of bona fide needs are things such as rent and utility bills. These are the bare necessities. Being homeless is NO fun and it should be avoided at all cost. Next comes food but this is also an area where many of us dramatically overspend. It’s difficult to resist those yogurt covered pretzels even if they ARE $6.99 a box. Who wants to give up a treat like that? But if you are going to live on a budget, as we all must eventually learn to do, your grocery bill is one of the easiest places to cut costs. If you sit down and really think about it, you don’t NEED those yogurt covered pretzels, even though your mind may be screaming for them. Give them a pass. Also investing some time in learning how to cook and actually spending time cooking for yourself is a great way to reduce your spending budget.

When it comes to clothing, this is another place where many of us fall down. I personally never buy any new clothes anymore. I have learned how to shop in the thrift stores and it has saved me thousands of dollars annually.

Utilities are another big budget item. The question to ask yourself here is, “Do I really need cable TV or is it simply something I want?” I decided to go ahead and splurge on my cable TV because I decided that I couldn’t live without CNN. But, I clearly recognize that this is a WANT, not a need. It was something I choose to indulge myself in.

How do you define wants?

Some of us revel in our luxuries — weekly or monthly mani-pedis, shopping at an upscale boutique for our clothing. There is absolutely nothing wrong with doing that as long as you can truly afford it. What are some things that may genuinely fall into the “luxury” category which you justify as being real needs. These things might include something like having a newspaper delivered daily to your door. Is it something you really NEED? Probably not because you can look at the news online if you have opted for the luxury of having an internet connection.

How do you define a necessity?

When you think about how to define a necessity, you should think in terms of something that is indispensable to you. This is usually something that every person needs in order to survive. Again, I refer you back to the initial three categories: food, shelter and clothing.

But within those categories there is usually a lot of wiggle room. For example, you need to have a place to live but do you need to live in a luxurious penthouse? Probably not. You need shoes for your feet, but do you need to spend $300.00 on a pair of designer shoes? Again, probably not.

Looking at the Gallup Basic Access Index

The American Gallup polls have taken a hard look at the way Americans define necessities and have come up with a list of 13 basic items which they have grouped into three categories:

Food — they asked the respondents if they could afford food to feed themselves and how easy it was for them to find food which was affordable in their neighborhoods. They also wanted to know if their neighborhoods provided safe drinking water which was affordable and clean.

Housing — they asked respondents if they could afford basic housing for themselves. They wanted to know if the respondents were satisfied with their housing.

Health — almost half of the questions on this survey dealt with this category. They asked the respondents if they had access to a general practitioner and if they were able to make annual visits to a dental professional. They also wanted to know how much the average person spent on medical care. The last questions had to do with whether or not respondents lived in a place where they could exercise safely and have easy access to a medical practitioner.

Though approximately 80% of those polled said yes to all the above questions, that still meant that about 1 in 5 were living without these basic needs being met.

The basics: things you have to have no matter what like paying your utility bills are crucial. When you learn how to distinguish the difference between the wants and needs, you minimize the risk of being left out in the cold because you didn’t pay your rent.

Suze Orman, my go-to financial guru talks about the differences between wants and needs a lot. She gets up on her soapbox about people spending money on things that make their lives easier.

There is nothing wrong with giving into your wants as long as you can either pay for them in cash or put them on your credit card and pay it off in full when the bill comes without robbing money out of your grocery budget to do it! There is no question that it is nice to indulge our wants every now and then. Just be careful that every now and then doesn’t become a daily or weekly occurrence.