Needs, wants and luxuries-The art of prioritizing for a financially secure future!
Every one of us has certain needs in our daily lives, items we just cannot do without. Fresh water, healthy food, a shelter above our heads, basic clothing and of course fresh air tops the list. Certain other items fall a little below on our list of needs such as fancy clothes, dining out, an extra room in house all of which classify as important to us, but not necessary for our survival.These are our wants.
There is a third category of items which we most definitely can do without such as hi-tech gadgets, a BMW S-class, a home theatre to entertain guests, etc. These are called luxuries.
One must be able to identify the difference between these categories to ensure they are chasing the right goals rather than saving for the wrong ones. We at Fpguru.com would like to broadly classify our needs, wants and luxuries.
Needs: Your needs are those that are crucial for your survival. For eg: your health, a home, saving for your retirement etc. Purchasing a mediclaim policy for yourself and your family should be one of your top most priorities. It helps ensure you can provide the best possible care for your loved ones in case of an illness. Life insurance is also a must for those with dependents and must be purchased.
A home to live in is a need. With rising rents and accommodation prices, it is more cost efficient to purchase a house in the long run. Hence, saving for your home or even taking a loan to create an asset i.e. your own home is much encouraged and should be prioritized. Each one should have their own place to be warm and safe.
Retirement planning is of great importance and it is necessary to plan much in advance to ensure you have a secure and a happy retirement.
Apart from the above, education for your children, their weddings, a car for the family, your monthly nutrition requirements etc also classify as needs.
Wants: There are several items that make the list under wants such as regular holidays, or a grand wedding for your kids, a bigger car, a house with an extra room, and the likes of such things. All of these items are not crucial to our existence; however we desire to have these things. We desire to spend that extra bit to satisfy our wants along with our needs.
One must try to achieve their wants as after all money and life should be enjoyed to the fullest, however at what cost? It is not practical to want that extra room at the cost of taking a personal loan to fulfill it, or that dream wedding for your child out of your retirement savings. Hence, we must ensure our needs take priority over our wants. And once all your needs have been accommodated for, you can enjoy that holiday in peace.
Luxuries: This is the third category of items which are the most attractive and most dangerous. These include a large house, luxury cars, a dream vacation to exotic destinations & cruises, etc. People often burn their fingers trying to achieve a higher than usual standard of living. They want to wine and dine at the best places, travel to exotic locations and own every hi-fi electronic devise in the store. Many parents want their children to have a quality education and try to achieve this by enrolling their kids in schools which charge enormous amount of fees. However a glamorous education does not necessarily equal a quality one. These are not bad ambitions but must not be pursued at the cost of your basic requirements.
Your luxuries should be your last priority and if and only if all your needs and wants have been satisfied should they be pursued. Do not sacrifice a need for a luxury!
An individual’s needs wants and luxuries may greatly differ from another’s as this is an absolutely personal choice and depends upon several variables. However certain items will always make the ‘needs’ list and must be given top priority. Once these have been achieved, an individual is free to pursue his wants and luxuries.
By Shalmali Kulkarni.
The writer is working as a para-planner with Fpguru.com
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