You may be spending money on practical needs that are comprised of superfluous wants.
Once again, finance writer Trent Hamm has presented a concept that feels like a lightning bolt of brilliance. In a recent article for his blog, The Simple Dollar, he explains how people spend money on items that meet a practical need in their lives, without realizing that a large percentage of the cost is not actually necessary.
Let me explain. It's helpful to think of all purchases as being on a spectrum. There are numerous ways to achieve the same end, all of which cost different amounts. Take transportation, for example. The cheapest way to get somewhere is walking, the middle-range approach is to drive your car, and the extremely expensive version is to fly a private jet – but they all take you to the same place. (Obviously oceans and distance factor in, but please bear with me here.)Hamm then apples the same logic to laundry detergent. The goal is clean clothes, but this can achieved with homemade detergent or Tide and Febreze or swanky Whole Foods-type organic detergent. All cost different amounts, but all equal the same end result.
Now when you think of purchases on that spectrum, you realize that much of what you're spending may be unnecessary. Hamm writes,
"Just because you are buying something that addresses a need in your life does not mean that a large portion of that expense is not actually a want. It is so easy to just file that expense away as wholly need-based when that’s frequently not the whole story."
The cumulative effect of choosing walking over driving, of ordering the cheapest item on the menu, of buying the shirt that's on sale, of getting a book from the library instead of ordering online, of staying in a cheaper hotel, etc. can result in extra money, which can then go toward meeting real needs, such as debt repayment. And yet you're never deprived. You still get somewhere, fill your belly, clothe yourself, read, and sleep, only with added profit.
I suppose this is a long-winded way of saying "be frugal and choose the cheapest option", but it's also an important reminder of how wants can masquerade as needs. It's easy to fall into habits, to continue buying the same products without questioning their true value or usefulness. Hamm says it shouldn't become an obsession, but more of a guiding principle:
"Once the idea is natural for you, you can apply this kind of thinking quickly to almost every expense in life. It boils down to instinctively figuring out what you actually need from that particular item and how valuable the various levels of 'want' on top of that need actually are."
It makes perfect sense.