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Want to spend less and save more money? Redefine this one word

It may be time to rethink your definition of the word "necessities."
by Holly Trantham /
Image: Woman takes money out of her wallet
Getting used to buying things regularly that you don’t actually need, and especially that you don’t even want that much, will surely lead to overspending — and fast.Anfisa Kameneva / Getty Images/EyeEm
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When it comes to making a budget, most of us know there are two basic categories of spending: the things we have to pay for, and the things we don’t.

It’s very easy to tell which things are non-negotiable: our mortgage or rent, utilities, medical costs, transportation, food. For parents, childcare would also qualify. They are all expenses that fall into the bottom levels of Maslow’s Hierarchy of Needs — when they’re taken care of, we don’t feel their effects. But when they are missing or lacking, we can feel intense anxiety.

We all need to meet our basic needs before we can accomplish our greater financial goals. For example, you probably can’t expect to save for a house down payment if you are barely able to cover your monthly food costs. Saving for retirement is also much easier once you’re no longer buried under a mountain of student debt.

Shelter, food, paying off debt — those are necessities. But sometimes, thinking in terms of “necessities” can get us into serious financial trouble.

For example, we can’t go without housing. Most personal finance experts will agree that it’s typically affordable to spend up to 30% of one’s annual income (before taxes) on housing. Yet most Americans are spending 37% of their incomes on housing costs, according to the U.S. Department of Labor. If your household income is $100,000, that seven percent increase could account for $7,000 in lost potential savings each year.

I know how easy it is to get lured into the higher-cost housing trap. My partner and I recently moved from Midtown Manhattan, where he’d chosen to live out of convenience four years ago, to a less convenient (but thankfully much quieter) part of town. We didn’t even have to downsize; just by moving to a different neighborhood, we’re spending nearly $1,000 less per month than we were previously.

There’s no denying that housing is a necessity. But more expensive housing, whether for the sake of a “better” location or more space, is a luxury, and I think that’s something a lot of us take for granted. We may think our baseline expenses are necessities, but getting comfortable with higher standards of living often means paying more than we really need to — and perhaps even overspending.

Of course, thinking of things as necessities doesn’t just apply to big-ticket budget categories like rent. It’s extremely common to think we need personal care or clothing items that we actually don’t.

That’s something Desirae Odjick, the brains behind the popular personal finance blog Half Banked, has experienced a lot first-hand.

“I think this happens so much, especially with the way social media shows us perfectly-polished images of what ‘everyone else’ has,” she told me. “I've definitely been lured into buying clothing and decor that I felt like I needed to have because I kept seeing it on Instagram! (But seriously, who hasn't?).”

She went on to explain that social media isn’t the only culprit for overspending on material items we think we need. “Our in-person environments can create the exact same effect. If everyone else in your friend group is buying something, or spending money on an experience, it very quickly feels like you need to spend money on it, too. The same goes for the workplace — it's so easy to normalize take-out lunches, expensive clothing or networking events as essentials because everyone else is buying them, but even when they feel like necessities, they really aren't.”

In order to wiggle your way out from under excessively spending on what you think are necessities, here are a few questions to ask yourself before making a purchase — big or small.

If what you’re spending on is simply a want, and not a need, you may want to rethink the money you’re about to drop on it.

1. Do I want this or need this?

Odjick’s point about takeout lunches is a good one: yes, we need to eat. But do we need to spend $15 on a salad every day? Probably not.

Of course, if you’re a high earner or good about limiting your spending in other areas, daily lunches might not break the bank for you. But for so many of us, seemingly small expenses like takeout lunches and daily lattes can really add up, without us even realizing it.

Next time you go to buy something, ask yourself this question — and be honest. If what you’re spending on is simply a want, and not a need, you may want to rethink the money you’re about to drop on it.

2. Can I spend less to achieve the same level of satisfaction?

Of course, a life without any discretionary spending isn’t a palatable one for most of us. In fact, Odjick encourages everyone to spend money on things they like.

“You might opt to keep some of the extras, which is totally fair, but getting clear on what counts as a necessity can help you really enjoy your discretionary purchases more. You don't need a latte, but that doesn't mean you can't enjoy one — and if you know it's a treat, as opposed to what you buy without thinking about it because you need it, you'll probably enjoy it more.”

Being honest with yourself about what you do and don’t actually need makes you appreciate the non-necessities more — which makes them even more enjoyable. But here’s where you ask yourself the next question: If I know this isn’t a need, is it still worth it to me, or just a default?

For some of us, those afternoon lattes are the highlight of our day. It’s worth it to put money towards things that bring us genuine joy. But for others for whom that latte is merely a habit, and nothing more, it may be time to rethink that default spending. Getting used to buying things regularly that you don’t actually need, and especially that you don’t even want that much, will surely lead to overspending — and fast.

How can cutting back on “necessities” make room for more wants?

Maybe you really love those daily lattes, but you’ve realized that, on your salary, you really can’t afford to keep having them if you want to reach your bigger financial goals. You of course can’t starve yourself or go without transportation in order to save money, but as much as it hurts, fancy coffee can go.

But fortunately, there’s probably somewhere else in your budget where you can find that $4 a weekday you’d like to spend on a latte. You just have to get creative with what you spend on necessities.

For example, we may know how important it is to cook at home in order to save on food costs — but we may not be optimizing our grocery budgets in order to do so. For example, Sarah, the who blogs at Smile & Conquer, sticks to a strict meal plan every week so as not to overspend on food. That way, she knows what she’s spending beforehand, and make sure she’s making the most of her shopping list by using several recipes with overlapping ingredients.

If you start paying better attention to your spending in one area, like groceries, you can figure out how to get your daily latte without jeopardizing your finances. $20 a week saved at the supermarket means $20 more you can put towards your coffee habit.

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