Are Your Financial Wants and Needs in Conflict?

The messiness of money and the entirety of emotional issues associated with money often place what you want in direct conflict with what you need. Eventually, all money choices boil down to how you spend your money.

How Do You Spend Your Money?

Your financial decisions usually have multiple layers, even if you ultimately make a choice based on a single deciding factor.

Sometimes, more money makes you happier, but this emotion can be fleeting. Ultimately, money is a tool to provide experiences and things that you think will increase your happiness. The distinction between what you want and what you need can interfere with happiness.

The question of having more money not only involves what the money can do for you, but also the cost, and the sacrifice usually necessary to make more money.

Societal Pressures on Money Spending

Emotions flood your consciousness when you make money choices. Mix in a large dose of social pressures from friends or family and you have an unhealthy formula. Just having more money or buying more things rarely is the answer. The “you and your neighbors” metric is self defeating.

How you spend money in some respects is a battle between your present self and how you view the future. Are you spending money on things that are long lasting or things that feel good today and are short-lived?

What you decide to do with money is important for your future; what you decide not to do can be equally as important.

Your Internal Scorecard vs. Your External Scorecard

Even if you don’t fully recognize it, your money choices are tallied on both internal and external scorecards. How you feel about yourself comprises the internal benchmark while what others think of you is the external measure.

Warren Buffett said, “The big question about how people behave can be traced to whether they have an inner or outer scorecard.” Do you often feel a strong pull toward the external scorecard even when you know it’s not your best option?

Are your spending decisions based in part on trying to change what others think about you? Does this spending advance what’s most important to you? Your money should have a function and a purpose that’s determined by you, not by others.

Wants vs. Needs

It’s imperative to distinguish between what you want and what you need. No matter how much money you have, it’s likely that you’ll need to prioritize your spending. Your desires and likes may be insatiable, but your money is limited.

One way to help separate needs from wants is to think about utility. A beat up 30 year old clunker may have the same usefulness or utility as a brand new Range Rover. Each vehicle will get you around, although you might prefer one over the other.

In The Art of Spending Money, Morgan Housel says, “Buying things for their utility gives you the ability to express your own identity, while chasing status often makes you conform to others’ identity.”

How you spend money is also related to how you invest. When you make spending choices you are trying to minimize future regret. When you make investment decisions, you’re to some extent trying to minimize risk. In the context of your future financial life, regret and risk are the same thing. Start there. Ready for a real conversation?

Disclosure

Apollon Wealth Management, LLC dba J.E. Wilson (Apollon) is an investment advisor registered with the SEC. This document is intended for the exclusive use of clients or prospective clients of Apollon. Any dissemination or distribution is strictly prohibited. Information provided in this document is for informational and/or educational purposes only and is not, in any way, to be considered investment advice nor a recommendation of any investment product or service. Investing involves risk, and while remaining invested can support long-term goals, it does not guarantee a profit or protect against losses. Advice may only be provided after entering into an engagement agreement and providing Apollon with all requested background and account information. Please visit our website https://apollonwealthmanagement.com for other important disclosures.