Do you Need it or Do you Want it?

Are you buying that brand-new gadget because you need it or because you want it? If you hesitated even for a second, this post is for you. Mastering the art of distinguishing between needs and wants can be transformative, especially for high-income professionals like physicians, whose spending habits can often be a reflection of lifestyle inflation rather than necessity. Today, we’ll explore how to differentiate between needs and wants, why it matters, and how you can prioritize spending to achieve your financial goals.

Understanding Needs and Wants: The Basics

Let’s break this down into simple terms. Needs are essential items required for survival or basic functionality, such as housing, food, transportation, and utilities. Wants, on the other hand, are the things you desire but can live without. That gourmet espresso machine? Definitely a want. A reliable car to get you to the hospital for a 6 a.m. shift? That’s a need.

For physicians, the line between needs and wants can blur. After years of grueling training, it’s tempting to reward yourself with luxuries—and you should! But the key is balance and intentionality.

The Hidden Costs of Lifestyle Inflation

Lifestyle inflation—or spending more as you earn more—is a silent wealth killer. After landing your attending job, you might feel the urge to upgrade everything: house, car, vacations, wardrobe. But if you’re not careful, those “wants” can quickly consume your disposable income, leaving little room for saving, investing, or debt repayment.

Here’s a relatable example: I once knew a physician who upgraded to a mansion immediately after completing residency. It wasn’t long before the maintenance costs, property taxes, and utilities on the “dream home” started eating into their budget. Despite a high income, they struggled to meet financial goals because they had over-prioritized wants disguised as needs.

Strategies to Prioritize Spending

1. Create a Monthly Budget

   – Begin by categorizing expenses into needs and wants. Tools like budgeting apps or even a simple spreadsheet can help you visualize where your money is going.

   – Allocate specific percentages for needs (e.g., 50%), wants (e.g., 30%), and savings/investments (e.g., 20%). Adjust these percentages based on your financial goals.

2. Ask Yourself the Right Questions

   – Before making a purchase, pause and ask: “Is this a need or a want?” Be honest with yourself.

   – For large purchases, apply the 24-hour rule. If you still feel strongly about the purchase a day later, it’s likely more meaningful to you.

3. Automate Your Savings

   – Set up automatic transfers to savings or investment accounts each payday. By paying yourself first, you limit the funds available for discretionary spending.

4. Embrace Delayed Gratification

   – Instead of buying that designer watch immediately, set a savings goal for it. Waiting not only builds discipline but also ensures you truly value the purchase. Avoid going into debt for items that are “wants”.

5. Conduct an Annual Spending Audit

   – Review your past year’s expenses to identify patterns. Did a “need” from last year turn out to be a want in hindsight? Use this insight to adjust future spending habits.

6. Set Clear Financial Goals

   – Define short-term and long-term financial objectives. Whether it’s paying off medical school loans, saving for your child’s education, or achieving financial independence, these goals will help guide your spending priorities.

Navigating Peer Pressure and Physician Culture

Let’s face it: physician culture often glamorizes the “luxury lifestyle.” Social media and colleagues can amplify the pressure to keep up. But remember, your financial journey is unique. Staying grounded in your values and goals will help you resist the urge to overspend.

Pro Tip: Surround yourself with like-minded individuals who prioritize financial health. Join physician finance communities or attend seminars to stay motivated and informed.

Conclusion: Needs vs. Wants—The Bottom Line

Distinguishing between needs and wants is a cornerstone of sound financial management. By creating a budget, asking the right questions, and setting clear goals, you can take control of your finances and enjoy the best of both worlds—financial security and the occasional indulgence.

Start today by conducting a mini audit of your expenses. What can you adjust to better align with your priorities? Share your insights in the comments below, and let’s continue this conversation about financial empowerment!