Needs vs. Wants by Lenny Cacchio

I have been a financial planner for a long time, working with affluent and high net worth people.  When I first got into the business, I was surprised to learn that “high income” does not necessarily translate into “high net worth”.  One of the first clients I worked with was making more than ten times what I was making, the equivalent of over half million dollars per year in 2008 dollars.  Yet in doing his financial plan I discovered that I had more money in the bank, and not to mention less debt, than he did!

I pondered how this could be.  Many reasons can account for a sick financial statement, but certainly one reason is inability to know the difference between needs and wants. 

A few months ago I stood before a middle-aged Kansas City audience and asked a couple of questions.  “How many of you in this room grew up in a house with central air conditioning?  How many grew up in a house with more than one bathroom?”

The response might have been unique to my audience, but not a hand went up to either question.  So, I asked, is air conditioning a luxury or a necessity?  Is it a need or a want?

My point was not to say that it’s wrong to have air conditioning or 2-1/2 baths.   If you can afford such comforts in life, enjoy them!  The point is to know the difference between needs and wants in order to allow for wise financial decisions.  “Wants” can be a good way to spend your money if you can afford it and take care of your “needs” at the same time.  The task is to discern the difference between the two, and that’s often the challenging part.

It’s like the story about a man approaching his preacher asking for assistance from church funds to pay the rent.  The preacher asks him, “How do I know if I give you the money that you won’t just gamble it away?”  Whereupon the man responds, “Well, I got gambling money.”

Helping people reach their financial goals is often too much like dealing with that man.  He felt that he needed the bigger house, and then the second house, and then the boat, and the three vacations each year while at the same time thinking that retirement and funding the kids’ college will somehow take care of themselves.   I wouldn’t tell such people to give up their air conditioning and the extra bathroom, but I would ask them to set some priorities about what is important and what is not.  We all have limited resources and have to make decisions on how to allocate those resources. 

You might not have the same level of luxury as that man, but we all have areas where knowing the difference between needs and wants can be a lifesaver during difficult economic times.  Remember these proverbs:

“If you find honey, eat just enough-- too much of it, and you will vomit.” (Proverbs 25:16 NIV)

“The eye never has enough of seeing, nor the ear its fill of hearing.” (Ecclesiastes 1:8 NIV)

“Whoever loves money never has money enough; whoever loves wealth is never satisfied with his income.  As goods increase, so do those who consume them. And what benefit are they to the owner except to feast his eyes on them?” (Ecclesiastes 5:10-11 NIV)

Lenny Cacchio

Excerpted from The Sabbath Morning Companion, August 9, 2008, by Lenny Cacchio. 
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