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Want Or Need? How You See This Blurred Line Is (Almost) Everything

Let’s say you have a friend who earns the same salary. You both have similar student loan balances and neither of you have inherited money. How can your friend own a condo and a paid-in-full car while you struggle to pay the bills each month? Or vice versa? These simple but powerful factors that make some people seem so “good with money.”

Be on the lookout for these signs of financial literacy.With back-to-school time approaching for college and graduate students, an age-old dilemma is rearing its head: what you need versus what you want. We’ve all heard of this duality, but when it comes to forming a deeper understanding, you may be stumped.

Until recently, that definitely described me.

The desire to form a guitar collection allowed me to convince myself that I “needed” to buy many different models and types. Starting in my late teens, this kind of behavior went on until I acquired 60—that’s right, 60. Then I had an epiphany. Under the guise of collecting instruments, I’d indulged my wants to excessive levels. A selloff began, and I’m down to “a mere 20.” I’ll never play half of them in a given year, and so I’m still trying to git rid of more.

When it comes to understanding our behavior with money, too many of us learn in unfortunate ways: we might get too deeply in debt, or have an emergency only to discover we have no savings tucked away. These are manifestations of a condition that Jorge Rivera, Ph.D calls “financial illiteracy,” which is he covers in a new book “Redefining Money: What Makes You Act the Way You Do About Money?” Rivera is the CEO of American Hope Charities, a research-based nonprofit in Bellflower, Calif.

“Millennials are making three fundamental mistakes when making financial decisions,” Rivera says. These are “lack of knowledge and understanding their natural personality, how emotions affect money decisions and lack of financial discipline.”

Some of Rivera’s observations — particularly those involving how our behaviors connect to the world economic condition — are frankly to difficult to apply at first. But he also has many practical observations, which we’ll concentrate on here.

With needs and wants, the lines can overlap in subtle ways. “For example, you need to eat, but you could pack your lunch instead of eating out at a restaurant, cafeteria or fast food place every day,” he says.

While that could be more of an individual decision, often wants are influenced by what the rest of our peer group does, he notes. This could include waiting in line hours before a store opens on Black Friday to snatch an elusive bargain, or buying the latest model of smartphone “because all my friends have it.” (I’ve been under that kind of pressure myself with the iPhone 5s, but have stuck with my 4s for the meantime, and it works just fine.)

Beyond this, the majority of us simply didn’t receive any financial education in high school or college. Rivera poses these thought-provoking questions: “Did your general education curriculum include teaching you anything about “financial literacy?’ or the wise use of money? Did any of your teachers share any tips about money? Did you learn the money survival skills you needed for life?”

In an overwhelming number of cases, the answer is no. “None of these skills are current curriculum  at all school levels except those courses explicitly required for graduation in accounting, banking and finance and business administration,” he says.

So how do we get smart about money? One way is to examine when our emotions hijack us and spending becomes an impulse, or a way of acting out. We’ve all heard of “retail therapy,” and a herd mentality rules here: If everyone else does it, why can’t we? The problem here, however, is that this can establish a potentially destructive pattern in your mind: get angry, buy an electronic gizmo; have a bad day at work, treat yourself to some shoes. Uncomfortable emotions will always rise in or lives, but the ability of our pocketbooks to keep up will almost always be limited.

Or as Rivera puts it: “You need to manage your emotions as efficiently as you manage your bank account.”

We can also get financially literate by expanding our concept of money beyond mere earning and spending. Susan Beacham, founder and CEO of the Chicago-area group Money Savvy Generation, splits money behavior into four distinct categories: spend, save, donate and invest. While her work is with kids, Beacham taught me that these basics apply to young adults, too. They’ve been useful in redefining my financial priorities, which frankly used to revolve around the “spend” part.

Gaining financial literacy also involves learning how to “read,” if you will. The more you read from experts (and on websites such as Money Under 30), the more you can apply to your financial life. Do you know all the tax deductions you’re entitled to (such as a home office) or do you just fill out a 1040EZ and call it a day? Do you know the tremendous power of compound interest in creating a retirement account, or are you waiting until “whenever” to get that IRA started?

In the end, financial literacy never happens automatically: You have to make it a priority. It’s easy and more fun to put bar hopping, barbecues and big-ticket items on the top of our “to do” lists. And indeed, it’s easier still to view those things as the rewards we give ourselves for hard work, or the hard knocks of life.

Viewed from another perspective, we reward ourselves every time we add more financial wisdom to our toolkit, or pause to learn a financial concept we don’t understand. Just as you watch closely how many of your friends have the “it” smartphone, look at the ones who have their financial act together. Ask them questions, learn from them, and put some of that knowledge to work.

Published or updated on August 18, 2014

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About Lou Carlozo

Based in Chicago, Lou Carlozo is a personal finance contributor for Reuters Money, a columnist with, and a former managing editor at AOL's Contact him with story ideas for Money Under 30 at, or follow him via LinkedIn and Twitter (@LouCarlozo63).


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  1. Aldo @ MDN says:

    The intro reminds me of me and my now fiancee. We work at the same company, have the same title, and pretty much earn the same (give or take a few hundred) but she had over a year’s worth of expenses saved up and I had zero!

    How was that possible? We both were paying for our cars (about the same each month) and we were both paying about the same for rent, so how come she had so much money saved up and I was living paycheck to paycheck? The reason was, I had all these toys laying around. Motorcycle, 46 inch screen TV (she had a 32 and it looks fine), a couple of weapons (don’t tell the government), a playstation and an entertainment system, plus hundreds of DVDs. I just spent money on really not that necessary stuff and she didn’t.

    She didn’t know magic, she just didn’t spend all her money and I did.

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