We may think our wants equal our needs. In other words, that we just have to have a certain pair of shoes or gadget to be happy, successful, etc. While this can seem simple when we’re talking about basic needs like shelter and food, it can get murky when we’re looking at other items. Here’s an easy way to really get conscious about determining the difference between a need and want.
In the last posting, we began to look at Weighing In, a technique for cutting through the financial fog that envelops so many overshoppers. Weighing In involves the disciplined recording of purchases—and something more. You also categorize each purchase, choosing from a master list that groups expenses into logical bins: Home, Food, Clothing, Entertainment, Education, and so on. And you assign each purchase a Necessity Score, based on your dispassionate evaluation of how much you need it. (Need, not want).
This data is entered into the Daily Weigh-In Form, which I introduced last posting.
Last time, we talked about the first and third columns, in which you record each Item Purchased and its Actual Cost. Next time, we’ll talk about categorization. For now, though, I want to focus on the concept of necessity.
In the fourth column, you assign each purchase a Necessity Score: 0 if the purchase is totally unnecessary, 1/3 if it’s not very necessary, 2/3 if it’s pretty necessary, and 1 if it’s entirely necessary.
There is, of course, a certain subjectivity to assigning necessity scores; the decision will depend to some extent on your psychological awareness, even on your existing debt level and your present and future expenses. But here’s a rough guide. If you fell and broke your leg during the week, the check to the orthopedist would be entirely necessary; you’d give that a Necessity Score of 1. If a pair of $500 Jimmy Choo sandals caught your eye, and, despite the fact that you have other sandals in a similar color and heel height and are $8,000 in debt, you bought them anyway, you’d have to stare truth in the face and rate your purchase a 0, totally unnecessary.
The occasional computer gamer who shells out $300 for surround-sound computer speakers when a carefully chosen $75 set would be entirely adequate has a subtler decision. If his old speakers were working, probably the Necessity Score is 0; if the old ones failed, maybe a 1/3 is justified.
As you’re assigning Necessity Scores, keep in mind that you can’t meet psychological needs through overshopping. However bad a day you’ve had, however angry or lonely you may be, buying something won’t really address your authentic needs. If you’re angry, you need to know it, feel it, and handle it constructively; the same is true for loneliness. Whether it’s a Baby Ruth or a little black dress, a cutting-edge video camera or an amber necklace, if you buy it to repair your mood, it probably gets a Necessity Score closer to 0 than 1.
As soon as you log each purchase, assign it a Necessity Score. Do this right away, even though, upon later reflection, you may decide to change the score.
Calculate a Necessity Cost (NC) for each item. This is its Actual Cost multiplied by the Necessity Score you’ve assigned it; NC = AC x NS.
At the end of each day, add up the Necessity Cost of your day’s purchases and enter the total in the double-boxed NC cell at the bottom of the form.
In the next posting, we’ll complete our exploration of the Daily Weigh-In Form with a look at categorizing.
Carrie Rattle is a Principal at BehavioralCents.com, a website for women focused on mind and money behaviors. She has worked in the financial services industry for 20+ years and hopes to inspire women to better prepare themselves for financial independence.