Why do people so often fail when they try and cut back on their spending and stick to a budget?
It’s because they’re told to spend less on “wants” – less money towards restaurants, limit their booze budget, stop taking vacations, etc.
The problem with this logic is that we are told to stop spending money on things that make us happy, but aren’t given any direction on what to replace those happiness-inducing activities with.
This is why thinking in terms of needs vs. wants is wrong. We’re told that if we want to reduce our spending, we need to stop overspending on wants. But wants are just an expression of underlying needs! Going out to bars is simply an expression of the need for friendship, companionship, socializing, etc.
I recorded a video to help you better understand how to reframe this idea of needs vs. wants. Fun fact – I satisfy my “need” for warmth in the winter by wearing multiple layers instead of using the heater. Some may call it cheap but…yeah, I’d probably agree 🙂
Unless we proactively think of other, ideally less expensive, ways to satisfy that underlying need, cutting that “want” from our budget will never last because we’re actually cutting out our needs. It’s then only a matter of time before we find another (and probably equally expensive way) to satisfy that need we cut. Yes, a need like socialization may fall lower on our hierarchy of needs than shelter, but it is still vital to one’s happiness.
An exercise for you
First, think of a “want” in your budget you feel you’re overspending in. Got it? Glorious. Now think of what underlying need(s) you are fulfilling with that want. Write them down.
Once they’re written down, ask yourself: what are 3-5 creative ways that you can fulfill the underlying need(s) of that want in a less expensive way? Write these down next to the underlying need(s) above.
Finally, tell someone/something about the ways in which you’re going to creatively save money while not making your life suck. For example, hit reply to this email and let me know. Or tie the piece of paper you wrote your answers on to the leg of a pigeon and release your ideas into the wild. Or stand in front of whatever pet you own and say “Pet, you are about to learn some of my inner yearnings”. Whatever you do, don’t keep this to yourself. Manifest it by putting it out into the world. You’ll be amazed at what comes of it.
Love,
Make A-gare-ica Gareat Again
I overspend on hair, nails, and clothes on myself. Super selfish as I have 3-children and a husband……………I get bored at work and have lots of time for online browsing………I get into so much trouble but I am not sure why? what is that need? to be selfish and only think of myself……..we have so much debt!
Just something to note, I think it’s important not to make yourself wrong here and say “I’m super selfish”. It sounds like you’ve gotten into a habit or pattern of behavior as a result of being bored – i.e. if you’re bored then you shop online. It doesn’t have to be that you’re selfish, shopping could be a habit you’ve formed as a response to boredom.
If that’s the case, then it’s important to look at A) why are you bored and B) what habit/pattern of behavior can you do rather than browsing online when you’re bored? It’s the idea of looking at the root of the problem (boredom) rather than the symptom (spending). Does that make sense?
I used to have that exact habit! I replaced it with reading financial blogs.
Ha! I love it. Interested to hear how you made that transition stick.
Good point. If you’re spending too much time and money watching TV, then you need to find something you really enjoy and are passionate about to replace your TV habit. Learn a new sport, join a new club, take up a new hobby. Anything that you enjoy that can replace the old expensive habit.
I did this last year and have really seen a difference. Instead of watching TV every night, I’m playing in a racquetball league, or building my blog and connecting with others in the personal finance community.
That’s interesting – if I were to try and guess what need watching TV fulfilled for you, I would have guessed relaxation. But I obviously would have been wrong – you’re being active (i.e. not doing something passive) which is really interesting and cool. Wouldn’t have guessed that, but that’s also why it’s important for someone on the outside not to assume, but to let someone work it out on their own.
Great point to get to your root need driving your want. I might add though that sometimes what we “want” will not deliver on your need. So even before you get to the step or replacing the want with an alternative one has to ask if the want truly fits the need. Sometime marketing or other pressures give us the impression that something will fill our wants that will not. You have to have an eye out for that.
I would agree, but I think an important distinction is the think of replacement wants through the lens of “how can this new want address the need in a less financially expensive way?”. A lot of times that will weed out things that arise from marketing pressures or these things we “think” we want. In cases like that I would say A) really dive deep into what that underlying need is, B) come up with as many creative ways as possible to fulfil that underlying need and C) pick the one that most aligns with your values/budget/plan.
I love this clever exercise. Unfortunately I had ZERO self-control while we were trying to get out of debt. I would buy things on impulse so fast my head would spin. I had to switch to a cash-based envelope system to prevent myself from straying away from needs. It was kind of extreme, but it definitely worked.
You’re right, it may sound a little extreme, but it’s exactly what many people need. They don’t need a gradual “moving away from”…they need a clean break. Stopping the use of credit cards and giving yourself tangible spending limits (i.e. a cash-based envelope system) is super smart. Glad to hear that worked for you! And I dig your blog too, just checked it out 🙂
I love this! Many of our wants are expressions of an underlying need. For me, this came in the form of multiple small subscriptions that added up. I had a Spotify account, full creative cloud account, and other numerous ones. It added up to over $50 a month! Not a bunch but definitely something to cut back on. I cut the Spotify membership since I found I did really like finding music the old way. I also reduced my creative cloud subscription.
I love that you found a way to cut things in a way that not only didn’t sacrifice the underlying need, but also allowed you to get more creative in the way you were doing it (i.e. finding music the old way). That’s the dream right there 🙂
A great way to frame the issue. Don’t deprive yourself, but satisfy your desires in a less costly way.
I don’t go out to bars much, but I do brew beer at home, have people over to share it, and attend a monthly meeting of our homebrew club, which is much more social than a typical bar scene.
Win, win, win.
Cheers!
-PoF
Exactly. And I love that you’re already there in your own life. Not that surprising though since you’re already financially independent. I checked out your blog and love what you’re doing, what you’re about, and how charity is a big aspect of it too. Let’s definitely stay on each other’s radar, it’d be great to link up down the line!
I got lunch out today because I was tired last night and didn’t cook. I’m usually better with meal planning but a family medical issue has me traveling every other weekend for now. I do blue apron food delivery service some weeks, and I’ve learned some cool techniques, but I started cooking at 930 and finished about 15 minutes ago, a little after 11 pm. I now have lunch for tomorrow, & Friday! But with everything going on I’m much better off cooking for 4,6,8 meals at once. A crock pot meal, or baking chicken is a better use of my time than 3x 2 serving meals for right now.
Of course I did use gift cards to pay for lunch, so it’s not a hit to my budget.
In the past I’ve tried to not eat out, but it’s a social thing, or I just want someone else to cook for me. I made a spot for it in my budget and keep it modest.
I’m pretty logical / rational with my wants vs needs. A typical impulse buy at the grocery store is avocados, or seltzer on sale. I have mostly given up other shopping but I need to replace my shoes this spring. I didn’t get new shoes last year so it would have been early 2015, or before.
I think your insights about still meeting our wants is great. Will power only lasts so long.
Thanks for sharing all of this and your experience. You bring up a good point when you said “I made a spot for it in my budget and keep it modest” – it’s not that we can’t have wants like going out to bars, nice dinners, or even throwing in some seemingly ridiculous spends every once in a while. As long as their intentional spends/actions, then it’s alright. The point is not to reduce spending/consumption solely for doing so – there needs to be a reason and purpose behind it, otherwise one would just become a miserable ascetic. My dad approaches his spending more this way, limiting himself because he doesn’t think he should have it rather than asking “do I want it?” and being okay with spending as long as it’s planned in advance. How he grew up has a lot to do with it, but it’s shown me that not spending money solely out of fear, or because one feels they “shouldn’t spend”, isn’t a very good way of going through life either.
Switching to asking ourselves if something was a “need” vs a “want” was instrumental in our initial savings, but like you pointed out, it’s more of breaking a habit than anything. since we paid off our credit card each month, and maxed our 401k’s and still saved extra we didn’t think twice about spending on random crap for the house or yard or clothes or whatever. When we tried to see if we could drop our monthly bill by 10% and actually cut it by 25% barely trying, we took notice.
We realized our habit had become “we’re bored, it’s uber hot and humid out, let’s go shopping to get out of the house.” Plus, we would throw things in the cart because we “could afford it” not because we necessarily wanted or needed them.
I’d say our underlying want that drove all that excess spending was maybe validation that we’d finally made it, first good jobs out of school and all that, and we could afford to be frivolous. Aye yi yi…
Once we broke the habit of shopping because we were bored and tossing non-essentials into our cart on every shopping trip, we “found” an extra $24k to save and still live really comfortably.
For us it all started by questioning everything in terms of needs or wants and it worked well for us, jsut to make us mindful of each thing we wanted to purchase.
That is such a great, tangible example – thanks for sharing that. I think it’s important to have a perspective like yours because it didn’t come from necessity, it wasn’t like you were going to starve if you didn’t change your spending habits. But nonetheless you were able to save a lot ($24k!!) and, it sounds like, increase your overall happiness, by simply asking “why?” and being more intentional.
Have you ever read The Power of Habit by Charles Duhigg? He has a few interesting examples where people fall into unhealthy routines (or routines that don’t serve them) and just stay with them over time because they’ve totally lost sight of what made them get into the habit in the first place. In your case, when you got bored you shopped. Rather than stopping to ask “what else can we do when bored?”, habits are powerful because they had you just go right into the routine. Obviously you’ve broken that habit by now so you’re doing things right, but it might be an interesting read regardless.
I have not read that book. I suck at reading lately, so nope that hasn’t gotten on the list. But it should warrant getting in line. Yeah, in my field I know more than a few couples who each make 6 figure salaries yet still live paycheck to paycheck with no savings because they’re comfortable with just spending unintentionally.
It was mind blowing to us then and embarrassing now that we spent that much just because we could and didn’t question it. Mulch, yeah get it, new plants sure! New throw pillows, yeah! That weird elephant statue from world market, why the hell not, lol. Not out of necessity out of, “why is our bill always so damn high?!” Plain and simple. I’ve got lots of other habits that book could still help with. My allowance spending sure hasn’t gotten in line with our overall spending, so yeah I could use help there.
Haha I love that you used mulch as an example. That’s the real bank buster for most people! 🙂 You mention your allowance spending hasn’t caught up to how intentional you are with overall spending but you know, nobody’s perfect. A quote I try to live by is “it’s about progress, not perfection”. That allows me to not beat myself up too much, and actually make progress rather than think “if I can’t do it right the first time I shouldn’t try”.
If you do end up checking out the book let me know what you think! Always interested in getting people’s opinions on things I recommend to make sure I’m not just drinking some cool-aid.
There’s nothing wrong with wants in my opinion. We should want to be able to spend on ourselves. its how you go about the wants that is the big decision if you ask me. If you buy all of your “wants” without budgeting, saving, and beng prepared for it, than you may have to re-think it. But if you want a vacation, a new X, an appointment once a month that makes you happy, then you freaking deserve to get it! Life isn’t fun if you don’t have some extra things that make you happy.
Thanks for the great read today!
Bert
I agree – as long as there is planning and intentionality behind the wants, then there’s nothing wrong with spending money on things that will make you happy. Otherwise, people would be miserable and that’s just no way to live 🙂
Thanks for taking the time to read and I’m glad you enjoy it!
A few years ago I was talking to a co-worker about how I justify spending money and I brought up Need/Want but also broke it down to categories:
Want – ie I want another new tv but my current one works fine
Want/Need – ie I want a new pair of jeans and need them but I don’t need them immediately
Need – ie my only pair of shoes are falling apart
I explained that if it falls under the Need category I don’t need to justify spending the money. But I set a limit on how much I’ll spend
The Want/Need I will just have to set a timeframe to have the money saved up to buy (ie one less visit to McDonalds and Starbucks for the next three weeks) within a month or so.
As for Want if I can distract myself from thinking about it it might go away so it’s not that important. If I can’t stop thinking about it after a few weeks I’ll look at the finances to see if I can save up the money to buy it in 3 to 6 months (depending on the cost). If it’s something cheap I won’t even go that far to justify.