We all want a big estate, a powerful car, stylish clothes from the finest brands, and so on. While many of these things certainly can be realised, having a grip on your finances is all about identifying your own and personal ‘needs’ and ‘wants’, and acting accordingly.

Let us look at what a ‘need’ is in the first place. Basically, a ‘need’ is anything which makes it possible for you to live in a safe environment and to reproduce. This includes food, water, shelter, love and sex (including also social contacts). Be honest to yourself: do you really need anything else to survive? However, these basic needs may cause you to live fairly uncomfortable in the modern world. For this reason, we want to take it one step further for the purpose of this article and re-define what a ‘need’ is:

A ‘need’ is anything which makes it possible for a human being and his/her family to life a comfortable and exciting life.

Following this definition, what a person needs differs per individual. No two individuals are completely the same, and their needs may lie far apart.

Have you ever heard one of your friends say ‘but I needed this new pair of shoes’, knowing that the pair will end up in the closet together with 52 other pairs? Probably yes, and this is the essence why many people end up in a situation of debt, sometimes so severe that there is no way out of it but to file for personal bankruptcy (if you are such a person, please seek professional help from an independent advisor; the information on this website will not be sufficient to eliminate your debt).

Knowing the difference between needs and wants, it is essential to ask this question each time you go shopping. If you are not used to it, it is very easy to let yourself go in the process. If you have a credit card readily available, it does not make things easier. The essence is that each purchase should contribute to the quality of your life significantly; it should enhance and enrich your life. If this is not the case, you may do yourself a big favour and leave the item where it is.

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• Why Do We Take Financial Decisions, That Are Bad For Us?