How To Be Penny Wise: Smart Money Tips (Second of a Series)


Need vs. Want

How do you distinguish between a need and a want?  Being able to spot the difference is a fundamental tenet in wise, smart spending.

A need is something essential for daily survival and sustenance.  Food is definitely a must.  Need also includes what would be necessary to maintain dignity and decency in life.  Shelter and clothing fit into the criteria, and not to forget, necessities that fall under the personal hygiene department.

Those are just the basics.  But expounding on the subject expands its territorial bounds, extending to a whole gamut of incidentals required in the performance of work for our daily bread and butter.  Transportation fare for commuters or gasoline for motorists is part and parcel.  Home-based online jobs could not be accomplished without the aid of a computer.  In this context, needs are relative; they may differ in meaning and relevance depending on personal circumstance.  But I’m sure you follow the drift, right?

A want is something you can do without or live without.  It’s just about anything beyond or in excess of a need.   This can be a bit tricky, though.   People nowadays cannot do without a mobile phone (now smartphone).  While it is true that it has evolved into an important and necessary communication tool in this millennial age, it is an electronic gadget that, strictly speaking, falls under the “want” category.  As long as the mobile phone can deliver on functionality, that should be sufficient.  But itching to have more units than is necessary, or to acquire the latest, most expensive brand and model with the most sophisticated apps than what you can afford is considered a want.   A need item like clothing, when it becomes exorbitantly extravagant, is going overboard, unless you’re filthy rich.   When you buy new apparel to add to your cabinets already bursting at the seams with wardrobe, some of which remain unused, that is already a fetish, a caprice if you will, especially so if you are not a celebrity.

Know your priorities

When you have learned to distinguish between a need and a want, the next step is to learn to identify what is an immediate need and what can wait for a later time.  Recognize and admit that we can’t have it all at all times.   Learn FQ.

Have you heard of the marshmallow test?  A number of children were subjected to such test.  They were left inside a room with a plate of marshmallow, with a promise that they will be entitled to a double portion if they could wait till they got the go signal to eat.  The children obviously grappled with a tug-of-war inside them while they tried to resist the temptation laid before them.  You guessed it – most of them failed.  Click here to watch the video:

Self-control is the leverage.  And that requires discipline. The same is true with FQ or Financial Quotient, which is your ability to control and manage your finances.

It’s all about Delayed Gratification vs. Instant Gratification.  We are living in an era where patience is becoming more and more a rare virtue.  People are always in a rush, hence, the convenience offered by fast food, and any other stuff labelled “instant” like instant coffee and instant noodles.  There’s a growing generation of impatient people bent on satisfying their desires no later than NOW, only to figure out later how to extricate themselves from the mess they got themselves into.  Patient waiting buys you time to think things through.  It may be that your interest will eventually wear off, or you will come to realize that it’s really not necessary after all.  But a more rewarding prospect is being able to appreciate the beauty of waiting for the perfect time when the money for the item you’ve been eyeing becomes available.


Do not compare yourself with others.  Be content with what you have.  If you keep looking around you, you will see what your neighbour has that you don’t have, so the green-eyed monster rears its ugly head and cultivates envy.

Do not keep up with the Joneses.  We have different capabilities, capacities and circumstances.  Nothing rings truer than this quote from Dave Ramsey: “We buy things we don’t need with money we don’t have to impress people we don’t like.” 


(Photo credit:


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