Millioniare Rule #3

Learn to Say "No" to Your Wants (and those of others)
To be come a millionaire a person must be able to differentiate between what one NEEDS and what one WANTS. This is the third installment of my series Ten Simple Rules to Build Wealth. This rule is what enables a person to spend less than they earn and begin to save, invest, and create wealth. This is all much easier said than done. The easiest way to differentiate between what we need and what we want is to first identify a simple list of needs and then every thing else a 'want'.

List of Needs:
1. The Basics - Food, Shelter, & Clothing
2. Health/Welfare
3. Career/Employability
4. Ethics/Compassion
5. Social Connections - Friends, Family, & Community

Each of these five categories contributes to the ability of a person to survive AND thrive. Thomas Jefferson most famously coined the phrase, "Life, liberty, and the pursuit of happiness" in the United States Declaration of Independence and NEEDS are those things which are required to achieve Jefferson's vision. This might include nutritious food, comfortable shelter, seasonally (and socially) appropriate clothing, reliable transportation, education or vocational training, religious expression, medical treatment, and family gatherings.

Notable absences from that list are flat screen televisions, satellite television, alcohol, tobacco, and drugs. Trendy clothes, McMansions, fast cars, and gourmet meals are NOT included in the list of needs. I admit that I suffer from terrible gadget lust when I see a new Apple Computer commercial or 300 horse power BMW. The point is to realize that a used Toyota or Chevy will provide you with reliable transportation for a fraction of the cost.

I've read it a dozen places that it is not important how much money a person makes, but instead it is how much money a person spends. When you feel the impulse to spend money take a minute to consider the role your purchase will serve. Spend your money wisely on the things you need and then save what is left. However, just because something falls into the 'want' category does not mean that it is always bad. Periodically rewarding yourself with a special purchase will contribute to your happiness as long as everything is kept in balance. What is important is that the value of purchases is analyzed, and a rational decision is made.

A final note needs to be included to address the risks that other people present to the topic of needs vs. wants. A great example I have seen in the past is the first time parent. I have not had children yet, but several of my family members have recently become parents. Everything must be perfect for their priceless child (and no expense spared). They immediately went out to pick the perfect nursery colors, perfect nursery furniture, and perfect new born baby clothes. My mother and mother-in-law are both quick to point out (due to their plentiful experience) that a baby does not care what brand of bassinet it sleeps in nor will a toddler even faintly remember the wall color of his or her new born nursery. The new parents forget that the pile Baby Gap clothes they put on their credit card will be peed and pooped on daily and outgrown in a matter of weeks. Of course, new parents often don't see how what a baby needs if far different from the perfect nursery in the magazine. This same phenomenon causes us to complete with the neighbors to have the most green lawn and drive massive SUVs for one person to commute to their deskjob. Always remember how peer pressure and "keeping up with the Joneses" can cloud your idea of what is a 'need' and what is a 'want'.