Bottom Line
Golden budget rule:
Seperate your financial needs from your wants

By Steve Freidell, Land Line contributor

You wouldn’t routinely park your truck in the most dangerous parts of town. As a consumer, you need to learn to be equally cautious in how you approach financially risky situations. Otherwise you’ll fall prey to the most common form of financial assault. The one that is everywhere around us.

Advertising and marketing companies spend millions every year to study human psychological behavior in order to determine what drives people to buy products and services. They use this knowledge to assault the consumer with a barrage of messages both consciously and subconsciously. They are in the business of manufacturing “wants.” Understanding this about advertising is very important toward establishing barriers to protect you from this assault.

When trying to control your budget each month, it’s crucial to separate needs from wants.

A “need” is defined as a good or service necessary to survive or maintain a reasonable existence. A “want” is a product or service that may improve the quality of your life, but isn’t essential for your well-being. You need food.

You need a warm place to sleep. You also need clothes, electricity, and some form of transportation.

If we only spent money on things we needed, we would have a lot more money – but we would also have pretty boring lives. In our modern society, we have come to need “wants.” However, remember not all “wants” are created equally.

One quick walk around your house will almost certainly reveal at least a couple items – possibly many – that seemed essential at the time you bought them, but now sit around gathering dust.

More often than not, these were impulse purchases that were bought without really examining if they would truly add to your long-term quality of life. In a way, this sort of consumerism can become an addiction. The rush of buying that latest gadget lasts for a brief time, leaving you wanting more.

The best way to combat this behavior is by making a list of “wants,” and then deciding which items you actually “need” after consulting your budget. When presented with any potential spending situation, keep your list handy and stick to it.

Beware of the catch phrases – the sales, the limited time opportunities, the closeouts, etc. If an item was on your list before you went shopping, great; if not, keep walking. If that item is truly necessary, you can always come back and get it later (once you’ve examined your budget and added it to your list). Remember, the more time you leave yourself to think about a purchase, the less likely it is you will regret it.

If your budget is covered in red and looks like it’s been in a street fight, then you are putting yourself in harm’s way and allowing yourself to be financially assaulted. It’s time to stand up to the advertisers and the unnecessary “wants” that they are using against you. Get motivated. Get disciplined. And fight back! LL

This material has been prepared for informational purposes only; it is not intended to provide and should not be relied upon for accounting, legal or tax advice.

Steve Freidell has assisted clients in their cash management, trading, and portfolio management of fixed income securities since 1975. Steve started his career at the First National Bank of Kansas City and later served as first vice president with Commerce Bank, where he served his clients for 25 years. In 2006, he joined the DeWaay organization, the financial management company used by OOIDA. Steve Freidell may be reached at