There is a huge difference between what we want and what we need. We need food, shelter, and clothing. Sharing a $500 apartment with others qualifies as shelter, so does a $500,000 house, but we don’t need to live in a mansion. Vegetables can be home-grown for very little money; we don’t need to eat $100 meals in fancy restaurants. Clothing can be purchased at yard sales, thrift shops, and discount stores; we don’t need to exhorbitant prices for a fancy wardrobe. We don’t need internet access, smart-phones, automobiles, electricity, and a host of other luxuries to which people have become accustomed. Spending money on luxuries before attending to the necessities is a bad idea. Spending too much on the necessities is also a bad idea.
1) Years ago I attended a seminar that had been advertised as a resource to help people reduce their grocery bills. The woman who did the presentation was excited to share with us how she had cut the grocery bill for her family of four to only $800 per month. I was aghast! Since I was feeding my family of five for $200, it seemed to me that she was spending an unnecessary $600 every month.
2) A family I know had huge wardrobes of designer-label clothes purchased from full-price department stores. They ate out in restaurants at least once a week, and both parents went through drive-up windows for a latte on the way to work every morning. This family lost their home because they couldn’t afford to make their house payments after splurging on luxuries. If they’d eaten at home, shopped in less expensive stores, and left the house with a travel-mug full of coffee, they’d have been able to make the house payments.
3) One young woman I worked with knowingly wrote bad checks when she went grocery shopping, but managed to buy a fancy new car. Despite the fact that she could see our office from her apartment window, she drove to work every day and left at lunch to drive across the street to the grocery store. Without the expense of car payments, auto insurance, and fuel, she could have had money for groceries (and savings) without bouncing checks and going further and further in debt. She got sick, but didn’t have money to see a doctor (despite having medical insurance) because of the specific spending choices she’d made.
4) A young mother I know took her children to the pediatrician weekly because they seemed to always be sick. The children were on the state’s basic health plan and the family was struggling financially, yet the mom always found money for a two-pack-a-day smoking habit.
The amount of money we have available is directly related to our choices. If we spend money frivolously, it won’t be available when something important comes up.