I’ve mentioned in passing that life can be divided into three distinct spheres, the material (needs), the psychological (wants), and the social. Each sphere contains certain core elements that are central to our ability to live happy productive lives. I’ve already talked about how to identify the core material aspects (aka: needs) of your life. Today, I want to focus on the core psychological needs of your life, otherwise known as wants.
We all have wants in our lives. I can guarantee you that some reasonable portion of those wants cost money. Sometimes a lot of money. When I wrote previously about frugality, I mentioned my philosophy of deliberately and consciously allocating my money towards things and activities that are important to me, while minimizing my financial commitment to things of less importance. All the profit from this form of arbitrage makes it’s way into my brokerage account and helps me reach my goal of saving at least 50% of my pay.
Wants are often confused for needs. You may want a new iPad, but it is highly unlikely that you need one. You may want a vacation to Cancun, but it is unlikely that you need one. Yes, you probably need a vacation. No, you do not need to go to Cancun. Needs are really limited to entry level models of such basic necessities as food, shelter, clothing, transportation, and communication.
Unlike needs, wants are essentially unlimited. As each want is fulfilled, it will be replaced with another want. Maybe you’ll want the newer better version of what you just bought, or maybe your attention will shift to something else. The wanting will never stop.
At this point you’ll probably expect me to delve into some kind of a discussion about the respective merits of asceticism, Buddhist philosophy, or Stocism as being the antidote to desire. I’m not going to do that because no matter how much we try to deny our selves what we want, willpower is a finite resource. Eventually we will run out. When willpower fails us, we’re much more likely to part with our money, often in substantially suboptimal ways.
Achieving financial independence is a long game, and the ascetic lifestyle is only a good fit for certain people. A very small minority of people. What we need is a better strategy for understanding our wants and ensuring that they are satisfied in a financially prudent manner.
Reasons for Wanting
Comforts. We may want something simply because it increases our comfort or ads more convenience to our lives. Contrary to the opinions of the extreme frugalists, there is nothing wrong with living an easier more comfortable life. A few examples. Having a dishwasher may spare you the drudgery of having to wash dishes. Having a mechanic change your oil may free you from sitting outside in the cold and doing it yourself. If I had a maid, I wouldn’t have to worry about cleaning the apartment or changing the cat litter. I really want a maid. Doing the dishes, or the laundry, or auto maintenance by yourself doesn’t make you a better person, it makes you a person who burns their free time doing chores.
Mental Stimulation. A lot of times we want something because it provides some kind of mental stimulation that will otherwise alleviate our boredom. Wants associated with hobbies often fall into this category. If you’re into photography maybe you want a new camera body or new lenses for your camera. If you’re into art, maybe you want new art supplies or you want to take classes to learn some new medium.
Status. Things convey status which in turn affects how we are perceived by other people and how they interact with us. In particular, clothes, cars, and homes are easily recognizable status symbols understood by everyone. If you wear a suit, you are likely more important than a guy in khakis and a polo (in the land of tech startups, this does not apply). If you drive a nicer car, people think you have money. If you live in a large, expensive home, then you’re probably rich. If you have the biggest TV among your friends, you’re the alpha dog.
Novelty. Sometimes we want things simply because they are new. New shoes, new computer, new TV, new kitchenware, new clothes. We think, and rightly so, that buying something new will give us a boost of happiness.
Take an Inventory of Your Wants
If you want to take control of your spending and steer yourself away from impulse shopping, you first need to get a handle on what you want and why you want it. Try the following exercises.
Current wants - Sit down and think about everything that you currently want to buy. Write down each item as it comes to you? What do you spend your time daydreaming about buying when you should be typing out that report at work? What do you ogle during trips to the mall? What are you currently pining for?
Past wants - For this exercise, think about everything you bought over the last several months. If there is something on that list that isn’t an actual need, write it down. Be sure to include not just one time purchases like a new purse, but also recurring purchases like your deluxe gold cable package.
Prioritize Your Wants
Out of all the things that you spent money on, which ones really made you happy? Which ones provided a more fulfilling, luxurious life for you? Which ones are currently sitting in the closet or under the bed?
Some time ago, when I did this exercise things like gourmet coffee, regular restaurant visits, and a considerable amount of booze all got cut back. The simple reason was that I wasn’t getting nearly enough enjoyment out of these activities as I was spending on them. I was and still am a foodie, but I started making my coffee at home and bringing it to work. I replaced eating out with cooking. And I curtailed my alcohol intake.
A few other things got the axe as well. For instance I stopped buying collectables (Action Figures and Magic: The Gathering to name a few. I never really grew up.) and scaled back my purchase of books (I had an awesome personal library), opting instead to get them from the library or simply hunt down the information I wanted online.
Several moves later, almost all of my collectables have been sold off and my personal library was donated to the city library. My DVD and CD collections were sold off as well. Funny thing is that I don’t really miss being surrounded by stuff. Why? Because most of it just sat there, collecting dust. It wasn’t actively and regularly making my life better.
Optimize Your Wants For Maximum Happiness
You can’t have everything. So now is the time to start going through your list of wants and picking out the ones that add the most value to your life and cutting loose the ones that don’t. Below are some guidelines for selecting your wants based on my reads from the growing field of happiness research. Note that this is a relatively new area of psychology research and things are subject to change as better data is produced. That’s just how science works.
- Experiences are better than things. Buying new things certainly provides a boost of happiness. But that boost is only short term. On the other hand if you spend your money on experiences, you’ll be able to get a much longer lasting boost of happiness.
- Engagement is better than passivity. The more engaging a given activity, the less your mind wanders. Mind wandering is correlated with unhappiness. So marathon TV watching should be out. In it’s place try hiking, exercising, or building or creating something.
- Social interaction is important. Sex, socializing after work, and having dinner with others are the daily activities that produce the most happiness. What do they all have in common? They involve other people.
- Status matters. Particularly status relative to your peers. Unfortunately, the pursuit of status can be an unending game. So if you are going to spend money on status, make sure that the spending is strategic and not just spraying money everywhere.
I have largely shifted my spending away from things and towards experiences and engaging hobbies (cooking, blogging, etc). I like to travel, take adult education courses, and otherwise work to better myself. I also like to get exercise, hike, camp, and otherwise enjoy the outdoors in seasons other than winter. Snowbirding is the life for me.
Just as I apply my program of frugal arbitrage to needs, I apply it to wants as well. It’s certainly a more methodical approach to things, but it prevents a lot of unnecessary spending. Plus, it helps to me to keep balance in my life. Aggressive saving isn’t something that can be easily sustained simply through austerity. If you aren’t enjoying life, sooner or later, you will give in and give up your money saving ways.
Readers: What are the wants in your life that you spend money on? Are there wants that you intentionally pass up?