How do you decide if an expense is a 'want' or a 'need'?

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nelson
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Re: How do you decide if an expense is a 'want' or a 'need'?

Postby nelson » Mon Oct 15, 2012 5:43 pm

What if Option A costs $3000 and will prevent you from dying for 30 years while option B costs $6000 and prevent you from dying for 60 years. Suppose there is an Option C that will only keep you alive for 1 week but costs only $1.

I would say keep picking option C every week until you save up enough to afford something better.

stannius
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Re: How do you decide if an expense is a 'want' or a 'need'?

Postby stannius » Tue Oct 16, 2012 5:16 pm

DoingHomework wrote:That's the problem with the whole want/need thing...everyone has their own definitions.


That's not the only problem.

To me, the biggest problem with these discussions is that it's not a binary value. There isn't a "grey area" because somethings are hard to classify. Rather, everything is on a single, continuous scale. Some things are more essential than other things. Then we arbitrarily draw a line on that scale and say that things on one side are "wants" and things on the other side are "needs."

But where the line is varies by person. So we can debate all day and never come to a consensus.

It also varies situation. So one day your car is a need because it gets you to work. The next day maybe you are laid off and don't need your car any more. The next day maybe you are mugged and the only thing you need at that moment is safety.

And the other big problem is, even if we did figure it out, what do you do with that information? Is it actionable? If you decided the horse food is not a want, are you immediately going to cut it out of your budget? If you decide it's a need, are you going to pay it NO MATTER WHAT? Neither of those is true. Rather, if something happens, you'll keep spending that money as long as it's falls above the line - and if your situation gets more dire, the line will move and more things will fall on the side of the line that causes them to get cut.

nelson
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Re: How do you decide if an expense is a 'want' or a 'need'?

Postby nelson » Tue Oct 16, 2012 10:02 pm

stannius wrote:That's not the only problem.

To me, the biggest problem with these discussions is that it's not a binary value. There isn't a "grey area" because somethings are hard to classify. Rather, everything is on a single, continuous scale. Some things are more essential than other things. Then we arbitrarily draw a line on that scale and say that things on one side are "wants" and things on the other side are "needs."

And the other big problem is, even if we did figure it out, what do you do with that information? Is it actionable?

One of the reasons we cast grey areas into binary values is because it makes them actionable. The theory being, if you can't make up your mind, using a heuristic to pick a "good enough" choice and following through is often better than spending all of your time trying to find a perfect choice and doing nothing at all.

It's like the Band of Brothers quote "Lt. Dike wasn't a bad leader because he made bad decisions. He was a bad leader because he made no decisions".


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