NEEDS VS WANTS, the Final Battle!
Today we’ll talk about the sometimes fuzzy differences between wants and needs.
Just to be clear, beer is always correctly labeled as a need!
Here’s a future mega-hit dedicated to the very topic:
OK, perhaps this guy needs to speed less and get in to work on time more than he does yet another beer… but now I’m just being judgemental. Sorry dude.
Back on topic then. Here is a list of Mr Beerver’s needs as listed by the man himself:
I need a beer!
I need a girlfriend and a beer!
I need a car to get both of those!
I need some decent clothes or no girl will ever talk to me!
I need a tv to keep my girlfriend entertained!
I need to learn to cook for her!
I need to buy super-expensive fancy foreign beer to impress her!
Woah! I need a bigger paycheck! I may also need to actually talk with my girlfriend and find out what she really wants (other than beer!).
Mr Beerver here should learn to distinguish between a need and a want. He may also want to learn how to better time his acquisition of wants and needs.
At its most basic, a need is something necessary for your continued survival. The pack of Twinkies in your pocket becomes a need more than a want after two days of being lost in the forest! In a more urban setting, a pack of Twinkies may not be the best choice to fuel your body and is a want, unless it’s all you can get your hands on for whatever reason and then it goes back to being a need. Simple enough.
Clothes to protect you from the elements are a need, those that make you look good in front of friends are a want. Some clothes land you a job or keep you in a job… those are doubtless needs in today’s society.
Unfortunately, I fear that most would dismiss beer as a mere want. Mr Beerver would tend to disagree and point out that beer formed the basis of ancient communities and has served as the glue to bond men together in the time-honoured quests for meat and girlfriends. To banish beer as a mere want when it has helped to create the very basis of civilization would be to turn our backs on our fore-fathers. Beer then, is a most definite need.
How much beer is needed of course, is a matter of some debate.
A few weeks ago, I posted the average American budget and said that beer should account for 2% of the annual budget. Unfortunately, when I had a look at Mr Beerver’s receipts last month, he’d picked up a 200$ bar-tab on a 1,000$ income.
Oh uh. That’s a full 20% percent of his monthly income! Ten times more than he can reasonably afford to spend. 20$/month on beer would seem much healthier but it would also make him pretty boring at parties in a bar. This may seem draconian but it can also serve as incentive for Mr Beerver to get himself more income.
Here’s an interesting graph of how many minutes of work you need to get yourself a beer in various countries. I didn’t make it myself. It’s from the internets but I can’t seem to recall where from. The U.S. and Canada do pretty well in that department but I’d have a hard time living in India!
Sorry Mr Beerver, but it’s going to have to be down to 10 beers/month for you! Cheer up though as the US truly is the best place in the world to be a beer-drinker!
Alrighty. We talked about needs and wants. Now let’s talk about getting them!
The interesting thing about most stuff in the world is that while it’d be nice to have it all, you may not need all of it right at once.
When you get paid then, there are three things you can do with your paycheck.
1. Save it and invest it.
2. Spend it all!
3. Use it to secure loans and spend many times the cash you actually got!
Clearly if no. 3 is what you find yourself forced to do despite buying nothing but true immediate needs and perhaps even forsaking beer, you need answers I can’t provide. If you’re using credit to buy a want earlier than you would if you had saved for it, then you’re falling into the great US credit trap.
Credit is not free money. It is future consumption denied. Using credit today means you’ll have less tomorrow to buy something else because you’ll be stuck paying out interest on your last purchase and just won’t have any more leeway for increased spending when you want it. So you’ll turn to credit AGAIN and once more future spending will take a hit. You wind up being able to actually spend less and less as your interest payments go up and up with each new spending cycle. You also sleep less and less well as you see your monthly liabilities, that interest to be paid, climb ever so gradually to the point where it equals your income. That’s the final GAME OVER line. This book ends at either chapter 7 or 11 and it’s not a pretty ending, either.
I can find very little positive to say for credit, be it personal debt or national debt. The only thing it gives is the illusion of wealth because it lets you buy stuff today that you couldn’t otherwise afford until next year. The only exceptions being student loans, house loans, car loans or some business loans.
That’s the power of the illusion, though. You can have it now. You don’t need to wait. Powerful stuff! The alternative is waiting forever to get what you want while everyone else has fun at the movies and at restaurants and here you are enjoying your walks in the park or along the river. That’s what makes delaying consumption so hard! I want a big Christmas tree THIS year, not NEXT!!
And yet… you will live to see next year even if you have nothing but good old Charlie Brown’s tree.
Most people opt for no. 2. They may disguise some of the spending as fake-savings but it usually ends up as spending anyway for most people I know. Saving for a car or for a house is not IMHO real saving. It’s just getting the cash together for a future spending spree.
No 1 is the real secret of the rich.
As I mentioned above, saving doesn’t mean accumulating some cash for a future expense. Saving means sticking cash in the bank and eventually investing it and THEN using the cash-flows you create to buy the stuff you want.
That’s the ticket to serious free beer! If you use some of the cash your investments throw off to pay for your needs and a few wants, you’ll soon find yourself living an improved lifestyle with less stress.
The biggest difference between the rich and the poor is that the poor use their income 100% for consumption. The rich use their income to buy assets which create the cash they use to buy stuff.
“Yeah… but I have no money to invest.” or “Yeah, but the rich already have money so this is circular logic BS.”Ah… there’s an argument for next week.