As a holistic, trauma-informed financial coach, I’ve got beef with many bits of conventional “wisdom” but for this article let’s talk about the one piece of bad financial advice you can ignore starting right now.
Approximate read time: 5 minutes
The Single Biggest Piece of Bullshit Financial Advice is:
“Only spend on what you need, not what you want.”
The wants-and-needs decision-making strategy is probably the worst piece of financial advice for anyone. Let’s talk about three reasons it’s not working, and then two tools I teach my clients to replace this flawed financial advice.
Reason #1 Wants vs Needs is bullshit:
Wants vs needs is emotional.
It’s difficult to find two words in the English language that are more emotional than “want” or “need”. Essentially we’re trying to make good, logical decisions using emotional language. Emotions are tools and are often a part of our decision-making process, but using emotions this way is overly simplistic and not reflective of the complexity of our lives.
Emotional decisions are typically very fast and solve for only one thing. Here’s a story from another article about a couple, each partner is solving one thing and making emotional decisions:
A couple, Sam and Mo, are shopping for a couch. The “right” couch is out there, they just have to find it, right?
Sam: Hey look, this one would fit great in the living room, and it’s in our price range.
Mo: Is it comfortable?
Sam: I don’t know, we could read reviews, or see if we can find it in a showroom.
Mo: Yeah let’s do that. It doesn’t matter how much it costs if it’s not comfortable, right?
Sam: Yeah, but if it’s not in our price range it doesn’t matter how comfortable it is because we’re not getting it, right?
Each partner is solving for one thing. Sam is solving for price, Mo is solving for comfort. They both think what they’re solving for is the only logical thing to be focused on, and they’re both engaging in emotional decision-making.
Reason #2 Wants vs Needs is Bullshit:
Wants vs needs is fast.
It’s too fast and easy to justify a decision to ourselves. All we have to do is check the “need” box and move on. Combine that with the simplistic emotional reaction from above, and we’ve got a lightning-fast decision made with little to no thoughtfulness.
Most of the time we know at the moment that we’re using justifications (at least at some level), but in the absence of any other way to make decisions, justification is all we have left. We feel like we have no other choice, and that messaging makes it harder and harder to trust ourselves.
Reason #3 Wants vs Needs is Bullshit:
Wants vs needs reinforces failure and scarcity. We have long memories of our own failures, and the wants vs needs strategy provide us with even more evidence that we’re not good at making decisions, even small ones.
And still, we don’t evaluate the decision-making process we’re using, only ourselves. Maybe you’re not bad at using the “just focus on your needs, not your wants” strategy, maybe it’s just a shit strategy.
That failure tells us we’re never going to have enough, never going to be enough, and never going to make the right decisions, which amps up the scarcity mindset and the pressure we apply to ourselves.
What I Teach My Financial Coaching Clients Instead
Understand the purpose of your spending
Try this exercise for just a week: Every time you spend money, remind yourself of the purpose of the spending. What job is this money doing for you? Some examples: “This $100 is so I can have dinner tonight and lunch tomorrow.” “This $4000 is so my family has a nice house to live in.”
By reinforcing to ourselves the purpose of spending we’re doing a few important things. As a financial coach, I’m helping reinforce your brains that we are actually spending money, making it “real”. Second, we are slowing down our spending. Any time you can include a little slowness in your decision-making, you’re increasing the likelihood that you’ll make a better decision!
Practice Decision Making
Second, practice decision-making that includes emotion, not emotional decision-making. Emotions are tools, but sometimes our emotional brains can get caught up and make decisions from a place of emotion, not just using them as tools.
Let me give you an example from my own life.
As of this writing, I’ve been without any kind of pet for just less than a year. My previous critters, a dog and a cat were both elderly, with many, many medical needs. As you may imagine, they consumed a lot of my time and energy. And I was happy about it. I got to be with both of them as they crossed the rainbow bridge, and my heart still hurts for the loss of them.
A few months ago a dear friend of mine reached out on behalf of someone needing to rehome their 18-month-old mastiff puppy.
What’s the emotional decision here? Well, I’m in my car and driving for two hours to get the dog right now! Of course, I am. I miss having critters around me and I have a soft spot for big dogs.
Emotional Decision Making
Emotional decision-making is typically fast. It’s a flood of emotion and activity, and in some cases can be kind of satisfying. Emotional decision-making also solves just one thing. In this case, I miss having critters and I love mastiffs.
Now let’s change my reaction a bit. We’re not going to shut out emotion, not going to expect myself to make a “logical” decision (whatever that means). Instead, let’s include emotion in my decision. So ya, I felt that gut instinct to adopt that dog. But I’m also still heartbroken from losing my last two. Am I really ready to fall in love like that again? That’s kind of scary.
By including emotion in decision-making, understanding why it’s there, and slowing down the decision-making process, I’m more likely to make a good long-term decision.
Including emotion in decision-making slows down the decision-making, and very often competing emotional motivations will bubble up. That’s good! That complexity is there to help. Now instead of solving for just one thing, I’m solving for two or maybe three things. Slowing down decision-making means we can look for and take advantage of other possible options.
Don’t Feel Restricted in Your Spending
“Just spend on what you need, not what you want” is a garbage piece of financial advice you can ignore. This kind of decision-making is too fast, deeply emotional, builds failure into how we make choices, and reinforces that we cannot be trusted.
By focusing on the purpose of spending and adding some slowness to your decision making you can make better and better financial choices without feeling restricted or like a failure!
Next recommended article: How to tell if any financial tool is garbage
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