Why is it so hard to live within our means? What is required to sustain us? What is required for us to function in our society? You know the answers as well as I do. We need food, water, shelter, clothing. In our society, there are some probable “near requirements,” such as transportation. The problem comes when we clutter up a requirement with a “want.”

We need food, but we want someone to prepare it for us. So, we spend twice as much on a meal out that we could have prepared at home. We need water, but does it have to be Perrier? We know we should only spend 25% of our monthly income on a place to live, whether you purchase or rent. But because we don’t like the location, or we want more space, we willingly spend 30% to 35% of our monthly income on a house payment or rent.

“Wants” are created by marketers to make us believe something is a need or requirement for us to live. Transportation is a good example. To get from point A to point B we need some type of transportation, whether it is our feet, a horse, a bicycle or a car. In many parts of rural Uganda, pregnant women needing assistance in delivery walk miles while in labor to a clinic or hospital, or they are taken there on a boda boda, which is a motorcycle taxi. Imagine riding 20 miles or so on the back of a motorcycle while in labor. When we were visiting Cozumel, we saw a family of four all riding on one scooter holding what appeared to be bags of groceries. But here in our country, the marketers tell us that to get from point A to point B we need something that will get us there faster, safer, quieter, cheaper (operating costs). Or we need to have all wheel drive just in case we hit that once in a lifetime blizzard. We need to have more towing capacity or power and torque just in case we need to yank out a 100-year-old tree stump that’s impeding our way. None of those are requirements, but instead are wants.

“Wants” always drive up the price of our requirements and “wants” always seem to sop up any extra income that we may or may not have. “Wants” put us under pressure to acquire more wealth or put us in debt beyond our ability to pay.

If you want to be financially successful, you need to manage your requirements so they don’t exceed your income and be careful not to confuse your wants with your needs.

These are the opinions of Mike Berry and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice.

Mike Berry is a Registered Representative offering securities through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Legacy Wealth Management, LLC and Cambridge are not affiliated. Cambridge does not offer tax advice.

Copyright ©2018 Mike Berry. All Rights reserved. Commercial copying, duplication or reproduction is prohibited.