When I was younger I felt there was a clear division between needs and wants. Spend money on your needs, food and shelter for example, and control your spending as much as you could with wants like video games or alcohol.
One day I encountered a persuasive article arguing this was a false dichotomy. Consider the following options for housing:
- A luxurious mansion, occupying acres of land with a household staff and every amenity imaginable
- Permanent residence at a high end hotel
- A condo at a prestigious address in a big city
- A McMansion in the suburbs
- A single family home
- A 3 bedroom, 2 bathroom apartment rental in a nice building
- A basement studio apartment
- A room rental in someone’s house
- Living in an RV
- Living in a van or car
- A yurt
- A cave
Are these all “needs” because they’re shelter? Are they all “wants” beyond a cave or a yurt? Clearly, they exist on a spectrum where each is providing a need – shelter – but are increasingly luxurious and therefore increasingly a want. What your minimum level would be on this list is very much dependent on your personal circumstances, which can change. Before I was married a basement studio apartment was more than satisfactory for me. Living with my wife, I think we’d want more than this.
You could easily repeat this exercise for food or any other necessity. Years ago I read an interesting blog where the blogger lived off of $1 / day for a month. What he found was that it was fairly easy to do this, but eating stopped being much fun – he just ate so he wouldn’t be hungry (often forcing himself to when he figured his daily caloric intake was dangerously low). He lost 18 lbs over the month and had a number of conversations with people who had experienced times of hardship in their life. This experiment has been repeated a number of times, including people who have eaten quite well on $1 / day. When he was an undergraduate, Elon Musk lived off of $1 / day of food to convince himself that he could keep his living expenses low while he launched his career.
With how we’ve divvied up the monthly expenses, my wife pays for food. I suspect she’s aware that if I was in charge of food spending we might end up on a $1 / day experiment =).
Nearly 1/2 the world lives on less than $5.50 a day. One argument would be that anything you’re spending beyond $165 a month is getting into “want” territory. This doesn’t mean you can’t spend it, but it does mean that it’s discretionary and you should consider where your resources are going.
These sorts of discussions can get into politics quite quickly, which isn’t my intention. Nickel and Dimed and Scratch Beginnings are two books that present the view of this issue from the two ends of the political spectrum. Rather than using this information as fodder for what should be possible for other people – I just use it to think about what is possible for myself.
If I think that my living expenses can be dramatically lower than most people assume, this opens up all sorts of possibilities. The US poverty level threshold was $11,670 for a single person in 2014. This works out to $32 / day. Whether needs are $5 / day, $32 / day, in between, or a little bit higher than $32 / day, this gives us some idea of when our spending goes from needs to want.
From this, it seems like I can live a subsistence-level existence for $1,000 / month. This won’t have a lot of luxuries, but I don’t think it would cause physical damage due to deprivation either. By being creative, I think I could survive on less than this. In the past, I’ve tracked my spending and been able to live off of less than $1,300 / month. This was being cost-conscious, but not making crazy cuts. $1,000 / month certainly seems achievable to me.
On the other end, I can spend more than this on the things I value. If taking an expensive trip every year is worth it to us, we can budget an extra $500 / month and put it towards a want that we’ll enjoy more than other options.
What do you feel is your “need” level of spending? Where do you splurge on “wants”? Do you think this is a useful division of spending?