Rethinking Your Spending: Necessities vs. Habits

Reviewed Aug 8, 2016

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Summary

Learn the differences between nice-to-haves, habits of convenience, and good habits.

The first step to saving more is to figure how you spend. Keep track of your spending, right down to the penny, for a couple of months and you will learn a lot. You’ll see how much you pay every month for things you can’t do without. You’ll also see how much goes for things that are nice to have but that you don’t really need.

You might find, though, that your spending for must-have items seems to eat up your income. You pay so much in this category that you have nothing left to save. If that’s what you see, you should take a closer look at how you draw the line between necessities and habits. You may find that a “necessity” is really just something that you’re used to buying, without thinking much about it. In other words, it’s a habit.

The survival test

First, let’s define the key terms. A necessity, as author and budgeting expert Cathi Brese Dobler puts it, is “something that is required for your family’s survival.” Or it’s needed for your own survival, if you have no family to support. Survival is a strong word. It means that you truly could not live without something. But it’s a good term to use here because it forces you to put every spending item to a strict test.

Some items really do pass the test. You must have them to live in comfort and good health. A roof over your head is one. Nutritious food is another. You can’t do without water, electricity, and fuel for washing, heating, and cooking. You need to stay clean, warm, and dry. You need clothing. You need some form of transportation. You need the medicine prescribed by your doctor. You need some way to stay in touch with others, such as a phone.

The nice-to-haves

But even within these areas, you may spend more money than your real needs require. Take food. When you go to the store, do you stock up on soda as well as on fruits and vegetables? If so, part of your spending is in the “nice-to-have” category. If it’s part of your regular spending, it’s a habit. So here’s a good way to define that term habit: Spending that’s driven by your “likes” disguised as “needs.” You buy soda because you like it and you’re used to buying it. You would be just as healthy (maybe healthier) doing without it.

Some habits are bad for you as well as expensive. You probably know what these are already. Smoking is one. Alcohol can be if you drink more than you should; even in moderation, it’s a habit that you can save money by breaking. If you’re used to a doughnut every day with a high-calorie coffee drink, you’re better off breaking that habit, too. Some of us have a shoe habit—we simply buy too many. Try going six months or a year with the shoes you already have. You might be surprised at how easy it is.

Habits in your mind

Other habits are subtler. They can be mental habits that lead you to shop in certain ways. Do you always pick well-known (and costlier) name brands over plain-label items? Unless you’ve given both products a chance and have found the brand-name version to be truly better, you have a brand-name habit. Without really thinking, you assume the brand name is worth the extra cost.

Another type of mental habit is the way in which people get used to things they once saw as luxuries. Cable TV can be one of these. You may have forgotten that you can survive without it. On the other hand, yesterday’s luxury can be today’s bargain. Cell phones are in this category. Compare the cost of cell and landline service: You may save money by getting rid of your landline.

Habits of convenience

Some habits form because they save effort. If you’re used to ordering books and movies online rather than checking them out at the library, you’re paying for convenience. But at a little cost in time (and maybe some exercise, if you walk!), you can get many of these items for free, or close to it. It’s also easy just to renew the same insurance policies year in and year out. Price-shopping at renewal time takes some work, but you may find you’re paying too much for coverage.

Habits can be good, too

Finally, there are the habits that you will want to nurture. For instance, it should be a habit to make a shopping list every time you go the grocery store. A plain-label habit at the grocery store would be good for your finances, as would a habit of regularly using the library. The same goes for a habit of cooking dinner from scratch each night rather than buying take-out food. A habit of putting money aside each month, even if just two percent or three percent of your income, may be the best of all. And you can get that good habit going faster if you can spot your spending habits and get them under control. 

Resources

The American Institute of CPAs has a site, www.feedthepig.org, dedicated to helping people save.

By Tom Gray

Summary

Learn the differences between nice-to-haves, habits of convenience, and good habits.

The first step to saving more is to figure how you spend. Keep track of your spending, right down to the penny, for a couple of months and you will learn a lot. You’ll see how much you pay every month for things you can’t do without. You’ll also see how much goes for things that are nice to have but that you don’t really need.

You might find, though, that your spending for must-have items seems to eat up your income. You pay so much in this category that you have nothing left to save. If that’s what you see, you should take a closer look at how you draw the line between necessities and habits. You may find that a “necessity” is really just something that you’re used to buying, without thinking much about it. In other words, it’s a habit.

The survival test

First, let’s define the key terms. A necessity, as author and budgeting expert Cathi Brese Dobler puts it, is “something that is required for your family’s survival.” Or it’s needed for your own survival, if you have no family to support. Survival is a strong word. It means that you truly could not live without something. But it’s a good term to use here because it forces you to put every spending item to a strict test.

Some items really do pass the test. You must have them to live in comfort and good health. A roof over your head is one. Nutritious food is another. You can’t do without water, electricity, and fuel for washing, heating, and cooking. You need to stay clean, warm, and dry. You need clothing. You need some form of transportation. You need the medicine prescribed by your doctor. You need some way to stay in touch with others, such as a phone.

The nice-to-haves

But even within these areas, you may spend more money than your real needs require. Take food. When you go to the store, do you stock up on soda as well as on fruits and vegetables? If so, part of your spending is in the “nice-to-have” category. If it’s part of your regular spending, it’s a habit. So here’s a good way to define that term habit: Spending that’s driven by your “likes” disguised as “needs.” You buy soda because you like it and you’re used to buying it. You would be just as healthy (maybe healthier) doing without it.

Some habits are bad for you as well as expensive. You probably know what these are already. Smoking is one. Alcohol can be if you drink more than you should; even in moderation, it’s a habit that you can save money by breaking. If you’re used to a doughnut every day with a high-calorie coffee drink, you’re better off breaking that habit, too. Some of us have a shoe habit—we simply buy too many. Try going six months or a year with the shoes you already have. You might be surprised at how easy it is.

Habits in your mind

Other habits are subtler. They can be mental habits that lead you to shop in certain ways. Do you always pick well-known (and costlier) name brands over plain-label items? Unless you’ve given both products a chance and have found the brand-name version to be truly better, you have a brand-name habit. Without really thinking, you assume the brand name is worth the extra cost.

Another type of mental habit is the way in which people get used to things they once saw as luxuries. Cable TV can be one of these. You may have forgotten that you can survive without it. On the other hand, yesterday’s luxury can be today’s bargain. Cell phones are in this category. Compare the cost of cell and landline service: You may save money by getting rid of your landline.

Habits of convenience

Some habits form because they save effort. If you’re used to ordering books and movies online rather than checking them out at the library, you’re paying for convenience. But at a little cost in time (and maybe some exercise, if you walk!), you can get many of these items for free, or close to it. It’s also easy just to renew the same insurance policies year in and year out. Price-shopping at renewal time takes some work, but you may find you’re paying too much for coverage.

Habits can be good, too

Finally, there are the habits that you will want to nurture. For instance, it should be a habit to make a shopping list every time you go the grocery store. A plain-label habit at the grocery store would be good for your finances, as would a habit of regularly using the library. The same goes for a habit of cooking dinner from scratch each night rather than buying take-out food. A habit of putting money aside each month, even if just two percent or three percent of your income, may be the best of all. And you can get that good habit going faster if you can spot your spending habits and get them under control. 

Resources

The American Institute of CPAs has a site, www.feedthepig.org, dedicated to helping people save.

By Tom Gray

Summary

Learn the differences between nice-to-haves, habits of convenience, and good habits.

The first step to saving more is to figure how you spend. Keep track of your spending, right down to the penny, for a couple of months and you will learn a lot. You’ll see how much you pay every month for things you can’t do without. You’ll also see how much goes for things that are nice to have but that you don’t really need.

You might find, though, that your spending for must-have items seems to eat up your income. You pay so much in this category that you have nothing left to save. If that’s what you see, you should take a closer look at how you draw the line between necessities and habits. You may find that a “necessity” is really just something that you’re used to buying, without thinking much about it. In other words, it’s a habit.

The survival test

First, let’s define the key terms. A necessity, as author and budgeting expert Cathi Brese Dobler puts it, is “something that is required for your family’s survival.” Or it’s needed for your own survival, if you have no family to support. Survival is a strong word. It means that you truly could not live without something. But it’s a good term to use here because it forces you to put every spending item to a strict test.

Some items really do pass the test. You must have them to live in comfort and good health. A roof over your head is one. Nutritious food is another. You can’t do without water, electricity, and fuel for washing, heating, and cooking. You need to stay clean, warm, and dry. You need clothing. You need some form of transportation. You need the medicine prescribed by your doctor. You need some way to stay in touch with others, such as a phone.

The nice-to-haves

But even within these areas, you may spend more money than your real needs require. Take food. When you go to the store, do you stock up on soda as well as on fruits and vegetables? If so, part of your spending is in the “nice-to-have” category. If it’s part of your regular spending, it’s a habit. So here’s a good way to define that term habit: Spending that’s driven by your “likes” disguised as “needs.” You buy soda because you like it and you’re used to buying it. You would be just as healthy (maybe healthier) doing without it.

Some habits are bad for you as well as expensive. You probably know what these are already. Smoking is one. Alcohol can be if you drink more than you should; even in moderation, it’s a habit that you can save money by breaking. If you’re used to a doughnut every day with a high-calorie coffee drink, you’re better off breaking that habit, too. Some of us have a shoe habit—we simply buy too many. Try going six months or a year with the shoes you already have. You might be surprised at how easy it is.

Habits in your mind

Other habits are subtler. They can be mental habits that lead you to shop in certain ways. Do you always pick well-known (and costlier) name brands over plain-label items? Unless you’ve given both products a chance and have found the brand-name version to be truly better, you have a brand-name habit. Without really thinking, you assume the brand name is worth the extra cost.

Another type of mental habit is the way in which people get used to things they once saw as luxuries. Cable TV can be one of these. You may have forgotten that you can survive without it. On the other hand, yesterday’s luxury can be today’s bargain. Cell phones are in this category. Compare the cost of cell and landline service: You may save money by getting rid of your landline.

Habits of convenience

Some habits form because they save effort. If you’re used to ordering books and movies online rather than checking them out at the library, you’re paying for convenience. But at a little cost in time (and maybe some exercise, if you walk!), you can get many of these items for free, or close to it. It’s also easy just to renew the same insurance policies year in and year out. Price-shopping at renewal time takes some work, but you may find you’re paying too much for coverage.

Habits can be good, too

Finally, there are the habits that you will want to nurture. For instance, it should be a habit to make a shopping list every time you go the grocery store. A plain-label habit at the grocery store would be good for your finances, as would a habit of regularly using the library. The same goes for a habit of cooking dinner from scratch each night rather than buying take-out food. A habit of putting money aside each month, even if just two percent or three percent of your income, may be the best of all. And you can get that good habit going faster if you can spot your spending habits and get them under control. 

Resources

The American Institute of CPAs has a site, www.feedthepig.org, dedicated to helping people save.

By Tom Gray

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