How Do You Know You Need It?

My wife and I value our family time and have traditionally spent weekends (and the odd week) at her family’s cottage. However, in the last few years we have decided that we should make an effort to take vacations to different destinations. We feel that family vacations are an opportunity to spend time together and build important and lasting memories.

Since my wife cannot fly, we decided to buy a small RV travel trailer.

When we made the decision to buy the RV, it was always clear that we didn’t need the trailer, but rather we wanted to spend family time together on vacation and the RV was the most reasonable way for us to do that.

What Are Needs?

How many times have you said to yourself “I really need those designer jeans” or “I need to get a new snowboard.” But what does the word mean?

Needs are things that we truly cannot live without.

By scaredy_kat (cc 2.0) via FlickR

Needs are the things that are required for us to exist. As humans we need food and water to nourish us, clothing and basic shelter to protect us from the elements, and some means of transportation.

My mother grew up in a two bedroom house with her parents and her two brothers. My grandparents shared one room and my mother and her two brothers shared the other. The kid’s room was 12×10, had 1 dresser and 1 queen sized bed. The house had heat and running water and did exactly what it was supposed to: Protect them from the cold Saskatchewan winter and hot summers.

In my family’s case, clearly we don’t need the RV to survive unless we intend to sell out home and live in it full time!

What Are Wants?

Wants are the thing in life we’d like to have. This includes a larger house, a brand new or exotic car, video games, the snow board … the list goes on. These are the things in life that make us feel better or comfort us.

We purchased an RV to spend family time together. This is something we value and want. But an RV is not something we need.

The risk many of us make is that we tend to justify wants by turning them into a need. And sometimes I hear people justifying a want by claiming it is an investment.

But It’s An investment?

An investment is something that pays you back or increases in value. Purchasing stocks, bonds, GIC’s and other financial investments are classic examples of investments.

Other purchases can bring you income and qualify as an investment. For example, I purchased a computer to be able to run this website and pay regular fees to host the site. The advertising revenue I receive in return is sufficient to cover those costs and return even more value to me.

Don’t get caught using the term investment to justify a want. One thing I hear frequently is, I need to invest in a new car. Do you? Why? Will it pay you back? How much? What does it cost you to maintain this new car? What if you had something more modest and invested the difference?

Don’t kid yourself, you may need transportation to get to your job and provide food and shelter, but you don’t need one and it is certainly not an investment.

While our RV may hold its value over time, but I seriously doubt I’d get more than I paid for it in the future. It’s not an investment in a financial sense.

Making A Choice?

When your making a purchase consider whether it’s a need or a want. If you are satisfying a want, ask yourself if you have satisfied all of your needs first and avoid the trap of justifying it as an investment.