What are you buying? Reassessing wants vs needs
While I generally advocate a learn-it-yourself, build-it-yourself, do-it-yourself lifestyle, I often find myself buying things like anyone else. The question I always ask before making a purchase is, “is this a want or a need?”
It turns out that distinguishing between whether you need something or just want it is really difficult. One of my favorite financial writers is Jacob Fisker, author of Early Retirement Extreme. In his book he argues that “there are no such things as needs and wants” and that needs and wants exist on a very blurry spectrum, from “if I don’t get water I will die in the next few hours” to “if I don’t get vegan, organic, kosher, fair trade, bottled water my friends will judge me.”
Because of the difficulty and subjectivity of defining wants and needs, I’ve found that a better question to ask when buying something is, “am I buying a tool or a symbol?”
A tool is something that you buy for a specific task or function, preferably one that makes you money in the long run. For instance, a wrench is a classic tool. If you buy a high-quality wrench and learn to use it, you may save money by not paying a contractor or plumber to perform simple repairs. One day your child or friend may inherit your high-quality wrench, still as functional as the day you bought it (or you can sell it on craigslist!).
No one buys a wrench in order to display it on the wall or carry it conspicuously in public (“Why yes, I do occasionally repair my own toilet. Why do you ask?”). If you bought a wrench for this purpose, you would be buying a symbol. You bought it in order to signal your status to others and to project your identity as a handyman (whether or not you actually repair things).
One of the simplest ways to live frugally and buy only what you need is to purchase tools and not symbols. Any object can be a tool or a symbol depending on its purpose. A bicycle can efficiently move you from one place to another, such as from home to work. A bicycle can be a powerful tool for saving money on transportation and taking you to your job, where you make money. It also provides fringe benefits of improving your health and appearance, thus saving money on medical expenses.
However, if you bought a high-end, carbon fiber bicycle to hang it up in the garage for other people to see, or only ride on the weekends to show other people that you identify as an avid cyclist, then your bicycle would be a symbol, and you should probably reconsider whether to purchase it. Symbols tend to be more expensive than tools (after all, a less expensive bike would work just as well unless you’re competing in professional races).
Moreover, symbols tend to encourage future spending on other symbols. No one will take you seriously as an avid cyclist unless you also buy the skin-tight lycra suit, right? And you wouldn’t really look committed unless you also bought the handlebar-mounted GPS…
Distinguishing between tools and symbols can help us avoid spending too much money in many situations, big and small. Should you buy new designer clothes every year to keep up with the latest fashions, or wait until your clothes are actually worn out and buy slightly less fashionable off-brand clothes? Should you drive a used Honda Fit or a new Cadillac Escalade? Should you send your child to the local public school or the elite private school?
Tyler Durden in the movie Fight Club (1999) was right when he said “the things you own end up owning you.” Declining to buy symbols can help us avoid an emotionally empty cycle of trying to purchase our identity. Keeping your lifestyle mostly utilitarian by choosing tools over symbols will go a long way to helping you focus on the important things in life that truly make you happy: family, friends, leisure, and working for a cause you believe in. These choices are also likely to make you rich along the way.
Alejandro is a financial planner with Monte Largo Financial Advisors LLC.