Wednesday, July 15, 2009

Personal Finance Part 13 - Differentiating Between Needs and Wants

So much has been said about personal finance in my previous write-ups and postings, but the key issue which I had mulling about is how we, as humans, classify our possessions and services which we use. Each person has his or her own unique perspective and upbringing and therefore no one person will view “needs” and “wants” in a similar manner. That said, in affluent Singapore, which is one of the richest and most prosperous countries in South-East Asia, the distinction between needs and wants is slowly but surely blurring. This post is to explore underlying beliefs of mine as to what constitutes needs and wants, and how we can build a comfortable nest egg to achieve our retirement financial goals.

In a basic Maslow’s Hierarchy of Needs chart, needs are made up of basic security needs and food and water (subsistence), which half the world does not really have adequate amounts of. In Singapore, we are much luckier than the average human being in that we have plentiful amounts of food, drink and shelter; thus we can theoretically move on to a “higher plant” on Maslow’s hierarchy, exploring issues of esteem and self-actualization. Now that we have got past the basic issues in life, we tend to yearn for something extra to improve our quality of life, and this translates into possessions which used to be “wants”, but gradually became recognized as “needs” as society progressed.

Some examples of “wants” which are not viewed as “needs” include a personal computer (PC), handphone, iPod, iPhone and television. Some may even throw in a car as a necessity, even though Singapore is arguably one of the smallest countries around (we are referred to somewhat condescendingly as a “tiny red dot”). The reason for the upgrade in perception is because these items (mainly gadgets I may add) have elevated our lifestyles to such comfort and convenience that we have become accustomed to it; and once human beings reach a level of comfort, they are unlikely to want to give it up and revert to a “simpler” and more basic way of living. This fact is probably the single most pervasive reason why people tend to upgrade their lifestyle and not downgrade (unless compelled to for financial reasons). Another reason is Asian’s issue of “face”, whereby one would perceived to be looked down upon if one had to downgrade or live a life more devoid of possessions than someone else.

So as materialism and “affluenza” take over our culture, people are becoming increasingly obsessed with material and physical possessions. When gadgets become a need rather than a want, this translates into needless spending just to “keep up with the Joneses”, and it is a never-ending self-destructive cycle of envy, comparison and jealousy. The news reports on the latest version of the iPhone 3GS attracting hordes of ardent fans, and such blatant advertising for a glitzy phone just serves to feed the frenzy further. Some teenagers resort to changing a new phone every 6 months just to “keep up with the trend”, and their parents continue to indulge them in such wanton acts of wastage. Where necessity gives way to fashion and chic, that is when one loses sight of what constitutes a need and a want. Marketers are increasingly being accused of predatory advertising, especially on young, innocent and gullible children. Flashy, stylish ads are designed to make you feel that the advertised item is a necessity in your life, and is marketed as “something you cannot do without”; in addition emotional advertising is utilized to full effect by appealing to consumers’ emotional response to a product or service, rather than focus on its features and functionality. These subliminal messages are insidious and slowly alter the sub-conscious of a large swath of youth, slowly transforming them into semi-mindless zombies, always wanting more.

Personally, I’ve always felt that we should pursue the simple pleasures in life without burdening ourselves with too many material possessions, otherwise we will start to feel empty as human beings are after all, group creatures. It is relationships and human warmth which fill the soul and makes one feel satisfied. Take the example of a father who showers his child with gifts and toys to make up for his lack of time spent with his child as he always has to work till very late. The toys and gifts are not enough to make up for the quality parent-child bond which money cannot buy. In fact, the example serves to reinforce that those things which money are unable to buy are the most valuable. Attributes such as love, care, concern, listening, attentiveness etc all contribute more to warm the human heart than all the material possessions.

In case the above paragraph sounds a little too clich├ęd, let me reiterate that I had once gone through the materialism phase as well when I was much younger. The fantasy with new toys fades just a few weeks (sometimes even a few days !) after playing with them, and I start yearning for yet another toy. The same can be said for the prevalent “retail therapy” syndrome which seems to infect Singapore – the purchases do not increase satisfaction and happiness to a lasting degree. As humans, we will always covet and want more, and this is a natural tendency; but to let it get out of control would turn a natural human instinct into a cardinal sin.

Therefore, my advice to readers would be to properly assess if an item or service is a “want” or a “need” based on your financial profile and retirement needs. No use buying a car just for convenience when you cannot afford the instalment payments and petrol costs. I invite readers to share their perceptions of “needs” and “wants”, and also how you judge if a big-ticket item falls into one category or the other? How often do you allow yourself to be pampered even if the item is a “want”?


lulu_loves_be@rbrick said...

I totally agree with you but sometimes it is really hard to control our desires for these 'needs'

mm said...

Hi MW,

Its been sometime since I posted any comments on your blog. Hope that you are well with your family :D

I like this piece you put up so here's just my 2 cts worth.

Well, as for me, I like to keep things simple. It wasn't always like that.

Having lived and worked overseas for more than 7 years including 3 yrs in the US and 1 year in India, Taiwan and months in Russia, Indonesia, China and Korea has changed my world view on what is impt in life and what isn't.

If you spend sometime helping out the Indian slum dwellers with your American colleagues and see how they live, you will start wondering "Here they are living in their metal shacks which is at best 4m by 3m. They sleep there, eat there, cook there.. a family of four.. Is that condo or the car really that impt??

The slums in Slumdog Millionaire is NOT an exaggeration. There are WORST slums out there in India.

They lived very simply.. and yet I always see them smile..

Singaporeans lived well.. and yet most of the ppe. I meet are dour-faced.. perhaps due to too much overwork and stress to feed the 5Cs dream..

Luckily my wife and I both think on the same frequency. Even after I moved up the corporate ladder (when I was still working), I have pretty much kept my lifestyle similar to what I was doing when I was a lowly paid engineer. So nothing much has changed...haha..

My wife and I believed more in financial freedom and having more time to spend with our kid than chasing after the 5Cs and watching our child grow LONGER not TALLER.. (cos' they are asleep when you get back)... :P

But that's just me.

The Singapore society and peer pressure can hold one back... esp. all the comparison... Luckily I am a pretty "bo chap and bo hue" person. If you think I need to live in a condo and drive a nice car then be friends with me, I can do without you as a friend :P

Sorry for the long comments.. tot I spill out how I feel about the Singapore society and your article..


Hapi said...

hello... hapi blogging... have a nice day! just visiting here....

H said...

Hi MW!

Its liberating to live a simple life.

Someone said:
We buy things we do not need,
with money we do not have ,
to impress people we do not know.

Some people may "need" to impress. "want" & "need" become unclear.

6But godliness with contentment is great gain. 7For we brought nothing into the world, and we can take nothing out of it. 8But if we have food and clothing, we will be content with that (1 Timothy 6:6-8)

Not only do we have food and clothing, we even have a roof over our head!

Oh, I am trying this out:

wonderful stuff that is free (almost) :)


JW said...

mm, that's a nice long comment to read :D

MW, I don't see myself as having a lot of wants... most of my expenditure comes from food... and it's hard to determine sometimes whether that particular type of food is a need or a want :D

E.g. I want to eat healthier, so I bought Gardenia Multi-grain bread to eat along a beef patty and 2 eggs for breakfast. Total cost is about a dollar more than what it would have costed me had I just bought economical bee hoon with eggs.

Is that a need (food), or is that a want (healthier food vs unhealthier food)? I feel "pampered" eating healthier food since I'm health conscious.

P.S. I'm a pig ;)

CreateWealth8888 said...

Just remember we only live once and we don't want to over-work, over-save, and then under-enjoy our lifetime.

patrol said...

does one want to have a need or need to have a want in order to justify one existence?

musicwhiz said...

Hello Lulu,

I would agree with you on that. Luckily for me, my "wants" are not much at all ! In fact, some friends have commented that I seem to have very few wants, compared to them. I guess it's just the simple life I am used to haha.


musicwhiz said...

Hello MM,

Always a pleasure to hear your comments as I know you are a down to earth person as well as a good investor.

Wow, you have really seen the world eh ? For myself, I have seen the third world countries such as Cambodia and Myanmar and the suffering in these countries too, for the common folk. So I can understand where you are coming from. These people just want some food, water and shelter yet we in Singapore are hankering after cars and condos. Sometimes it's sickening because we have lost track of what's truly important and fail to see how others are suffering for just a decent meal.

You are right to say these "poor" folk are happier and more content. A trip to Central Vietnam recently showed me how happy the kids were even though they lived simply and had to commute by bicycle. They were happy and curious to see us strangers and even posed for some photos, all the while smiling and grinning. Singaporean kids on the other hand are stressed, sulky and pressurized. Gee we can't even let kids play much these days and I see playgrounds being devoid of children. What happened to our childhood ? Ok I digress....

While I may not have the privilege of earning a lot in this lifetime, I do still hope to keep my life simple and fuss-free instead of going after materialistic possessions. Thus far I think I am doing OK on this aspect, but it's good to be able to get some reassurance that others are thinking this way too.

Thanks again and cheers,

musicwhiz said...

Hi Hapi,

Thanks for visiting !


musicwhiz said...

Hi HH,

Thanks for the comment, and I agree with you ! Life can be simple yet fulfilling as well !


musicwhiz said...

Hi JW,

What a coincidence ! Most of my "wants" also stem from having an overly healthy appetite, which has resulted in more fat than I would wish for ! So yes, I can understand what you mean by nice food and spending on good meals, because I do that as well. Some desires are indeed hard to curb....


musicwhiz said...

Hi 8888,

Point taken ! We should enjoy ourselves while young and if it's within our means. This I agree too. But I just don't wish to over-stretch myself; maybe it's just me la. Haha.


musicwhiz said...

Hi Patrol,

I am afraid I don't really catch your drift. Would you like to explain yourself further ?


PanzerGrenadier said...

Hi Musicwhiz

I think in Singapore we're generally blessed with the opportunities to be materially comfortable if we're willing to work hard for it.

But the issue has been in defining what level is "enough" in the material comforts.

Singapore society is such that we are under pressure to keep up with our neighbours. It is rare for people to be resistant to this pressure and to stand firm on their beliefs and to be happy in making up their minds what makes them happy instead of allowing the gahmen, the mass media make up their minds for them.

I realise I am not 100% immune to the pressures, but I try to look at what's truly important to ME. My own life is unique and I can't say if what I decide is important to ME is important to others.

Family, health and happiness. Money and stuff are the enablers but not the sole contributors.

Everyone has to decide what truly makes them happy. If it be a Benz or Beemer, so be it. But if it's family and friends on a budget, that's cool too.

Be well and prosper.

musicwhiz said...

Hi Panzer,

Yes, you are spot on ! It's good to know what's important to oneself, and not to be unduly influenced by others. Kudos to you for that !