Wants vs. Needs

People commonly misinterpret their "wants" as "needs." This is what leads many to make poor financial choices. We tend to spend our money on things we think we need. Do you really need a plasma TV, the latest video game system or the biggest SUV? In truth, we often want these items only to satisfy unreasonable emotional and social desires. We think they will gain us acceptance or happiness.

Plasma TV

Spending money on things we think we need, or that we think will create happiness for us, is based on the notion that we can accurately predict how we'll feel in the future after the item has been purchased. When you say to yourself, "I can't live without that plasma TV," you're predicting that your life will be much, much better afterward. In fact, you can live without a plasma TV, after all, you would have had to do without one if they had never been invented. If you were to buy a plasma television tomorrow, you'd probably stay home a little more often to enjoy it, but in time its impact would wear off and you'd be back to life as you knew it. Numerous studies examining the emotional impact of our purchases have confirmed that we overestimate the intensity and the duration of our emotional reactions - the effect our purchases will have on future events. In this case, we believe that buying a plasma TV will create happiness and fulfillment because we can't accurately forecast the emotional consequence of the purchase. Unfortunately for us, the thrill of a new purchase is usually only temporary.