Needs Vs Wants - Setting Priorities

When it comes to spending money, there are five facts that cannot be ignored. Mary Ann Kizer, Jefferson County Family and Consumer Sciences Agent, and Dot Hart, Arkansas Extension Homemakers Cares – Mental Health and Well-Being Chairman and National Volunteer Outreach Network Vice-President for 9 states, share those important facts that every consumer needs to know and offer some wise tips for making money decisions based on the “Buyerarchy of Needs.” 

Transcript

Mary Ann Kizer: Hey, Dot!  I’m so glad that we survived the holiday season!  Now, we’re back to recording a Grown Up U podcast. 

Dot Hart:  And what a timely one it is – How to Choose Needs or Wants.

Intro: (upbeat music playing.) Adulting is easy, said no young adult ever! The Grown Up U: Facts for Success podcast is back in its fourth season to help. Join us for podcasts, providing useful advice for living an independent and satisfying life as a young adult.

Mary Ann Kizer:  My name is Mary Ann Kizer and I’m the University of Arkansas System Division of Agriculture, Jefferson County Family & Consumer Sciences Agent in Pine Bluff, Arkansas.  Today my guest is….

Dot Hart:  Dot Hart – Arkansas Extension Homemakers Cares – Mental Health and Well-Being Chairman and  National Volunteer Outreach Network Vice-President for 9 states.

Mary Ann Kizer: In life we are all faced with many decisions regarding saving or spending.  Notice I mentioned saving first.  That’s because we say to “pay yourself first”.  We try to decide if we really need an item.  Fortunately, that’s usually an easy decision.  Needs are basic or necessary for survival.

Dot Hart:  In making decisions that involve the use of money, there are five facts to keep in mind.  Number one, we all have a limited amount of money. Number two, “Spending Choices” The decision to spend money one way means it cannot be spent on something else.  So, if I buy an expensive pair of tennis shoes, I may not have enough money for an expensive pair of jeans.

Mary Ann Kizer:  Number three is “Every decision you make affects other decisions”.  We need shoes, we want the latest style or several pairs of shoes.  There are lots of choices in between.  Number four is, “Good decision making requires that you think about your different choices”.  You can make a list of Advantages and Disadvantages per item wanted to help you decide if you should spend the money. Number five in making decisions is to decide if it is something that we need or something we want.  It’s important to know the difference.  

Dot Hart:  Wants make our lives more comfortable and enjoyable.  Wants are limitless.  Sometimes, a want for one person can be a need for another.  For example, if you are working the night shift and have to drive several miles to get home in the dark, a cell phone may be a need for your safety in case of an accident or if the car quits running.

Mary Ann Kizer:  Basic needs are food, clothing, shelter, and water. Money has to be prioritized to pay for basic needs or your health will be affected. Think about people who don’t have food left near the end of the month.  They can get sick because they don’t have the necessary nutrients needed to maintain good health.   

Dot Hart:  What do you think about this list of Needs or Wants: Garbage bags?  Dining table? Bed?  You can recycle plastic bags for trash.  You could eat while sitting on the floor or in a chair without a table.  Now, a bed makes life more comfortable, but some military people in war zones sleep under their bed so they won’t be injured by shells or debris from bombing.

Mary Ann Kizer:  Wants can make our lives more enjoyable and comfortable.  They often are things you’d love to have but could do without if you don’t have the money to buy them.  Some examples are eating out, having a manicure, a new bicycle, designer clothes, or going to movies. How should you start saving for wants?  Pay yourself first.  Ten to twelve percent of your paycheck should be saved for emergencies that often stem from wants.  If your company has a credit union, have your savings direct-deposited into the credit union before your paycheck appears in your checking account.

Dot Hart:  Throughout your life, you will be faced with many decisions about saving and spending. Your goals can vary from smaller purchases, such as a new smartphone, to larger purchases, such as a car or a house.   And, in the long run, dare we even mention retirement?

Mary Ann Kizer:  There are some life events that you can plan and save for, like higher education or starting a family, but it’s impossible to foresee all unplanned expenses. That’s what makes saving important — so you’ll be prepared for any type of expense by having money set aside.  One thing that I’ve noticed is vehicle accidents are getting costlier, especially if you have a $1,000 deductible.

Dot Hart:  The first idea for saving is to create a budget and stick to it. When you make a monthly budget, overestimate your expected costs. That way, you will likely end up with leftover funds, which can go right into savings.

Mary Ann Kizer:  Save wisely. Choose the right savings methods to match your goals, and make sure to do your research to find the best interest rates.

Dot Hart:  Be ready for the unknown. Create an emergency fund with three to six months’ worth of living expenses in case unexpected costs arise due to an accident or getting sick and can’t work.

Mary Ann Kizer:  Set financial goals to keep you on track. Use SMART goals so you know exactly how much you want to save and how long it will take to get there. SMART is an acronym that stands for Specific, Measurable, Attainable, Realistic, and Time-bound. When you set clear, written goals, it’s a lot easier to track progress and easier to attain the goals.

Dot Hart:  The ability to discern wants from needs is important in creating a secure financial plan. Most Extension services have a “Bean Game” which requires a person to allocate a preset number of beans towards differing financial decisions, some of which are needs while others are wants. 

Mary Ann Kizer: Laurie Rivetto, Michigan State University Extension - April 06, 2015, used The Buyerarchy of Needs to provide reminders on how to save money through the different levels of obtaining wants or needs.

 If you have ever taken a psychology class, you may have heard of Maslow’s Hierarchy of Needs, which looks at the structure of needs that influence our choices and behaviors. A newly imagined hierarchy of buying behavior needs has been created by Canadian illustrator Sarah Lazarovic. This “Buyerarchy” looks at buying as the last level after all other areas have been tried. This image is a great way to look at the choices made in buying and to focus on going up the pyramid in how items are obtained that we need or want. 

Dot Hart:  The goal in utilizing the “Buyerarchy of Needs” is to save money and keep it for future purchases where buying is the only option. Michigan State University Extension recommends using this as an opportunity to discuss money management.

Mary Ann Kizer: The base level Buyerarchy is “Using what you have”. While it might seem obvious, stop and think, do I already have the item or tool for my need or want? Being organized with your current items and belongings helps with this. If you can find the items you have, you can use them. Take care of things so they will last a long time.  Always use the food and supplies you already have before getting more.  Think “first in, first out” of your pantry.”

Dot Hart:  The second level from the base is “Borrow”.  Another way to make your money last is by using an item temporarily and then returning it. Consider if there is a place or person from whom you can borrow this item. Libraries are great for borrowing books, movies, music and sometimes even kits or tools. Friends or family might have a piece of equipment, interview clothes, or a cooking supply that you can borrow instead of spending the money to use for a limited purpose.

Mary Ann Kizer:  The third level from the base is “Swap”. This is a near cousin to borrow. Ask yourself if there is something you can trade to obtain this item. Do you know someone who might have the item you are looking for and might be willing to swap it with something you have? Trade a video game that you are finished playing with a friend for a new game or movie. Finished with a purse or clothing accessory? Someone you know also has an accessory that they can swap with you to enhance each of your wardrobes without spending money. Use freecycle.org to share your old items or swap for someone else’s items as part of a community of sharing or consider hosting a swapping event with your friends. Keep in mind, your “traded” item could be a service. Help your cousin with moving and ask if you can have their old desk.

Dot Hart:  The fourth level from the base is “Thrift.”  An easy way to “Thrift” is through Internet searches.  If you have time, you can actually go to thrift stores such as Salvation Army and Goodwill.  Many items have never been used and have their original tags.

Mary Ann Kizer:  The fifth level from the bottom – and second from the top – is “Make” which requires some time and talent.  You can make an item that you want.  Crafting, sewing, and carpentry are all skills that last a lifetime and will save a lot of money as you go through life.  Dot, what’s on top of The Buyerarchy of Needs?

Dot Hart: “Buy.”  Buying items should be a last resort.  Think chocolate covered pecans.  You can pick pecans, shell them, melt chocolate, and make your own chocolate covered pecans.  Print out the Buyerarchy of Needs and keep it on your wall or in your wallet. It can serve as a reminder to you when you find a want and need to explore the levels before making a purchase.

Mary Ann Kizer:  Remember, if you save money on your needs, you will have more money for wants, including savings for trips, emergencies, or splurging for items to remember that trip!  More information about how to decide and pay for wants and needs is available from University Extension websites.  

Dot Hart:  Thank you for joining us for our Grown Up U podcast. Call your local Extension office for more information about needs or wants.

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