Needs Vs Wants - Avoid getting materialistic

Saturday, October 9, 2010

World is turning out too materialistic, with many plastic card (credit cards) or finance option available it’s very easy to spend money. What’s not so easy to spend money wisely?

Knowing the difference between “wants” and “needs” is an important part of learning to manage money.

Wants are nice to have but not essential, eating out, buying a new fancy gadget.

Needs are the essential or the basic needs for survival, like shelter, food and cloth.

But, we have evolved over a period of time, in 70 or early 80’s if you had visited an Indian house, refrigerator was want. But, post 80’s it has become a need. Take a case, of mobile phone, it was a want even to an executive in late 90’s, however it matter of 4 to 5 years it have become a need to an executive at the same level as compared to late 90’s.

The list is endless…. One can add so many and further fancy advertisements in news papers, TV channels and peer pressure makes the wants turned into a need, which makes one to seek finance option and look out for use of “future money” option. By future money, I meant easy equated monthly installment option.

Its better one asks the basic question to himself “ Do I want it? or do I need it?” You might be surprised, many items would turn out to be your wants. Future money usage or credit might be a good option to finance your needs and not your wants. Again, if you are taking up an equated monthly installment option, at any point of time let is not be more than 30% of your total monthly income.

Though, there is no hard and fast rule, you may even go flat out that 100% of monthly income can go for equated monthly installment (EMI), it depend on what stage of you are in your life or higher percentage of equated monthly installment, may be OK for a month or two. But in long run for years together, its wise to ensure that equated monthly installment(EMI) content does not go beyond 30% of your monthly take home pay. This will also make you feel that you are in control of your debt content.

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