Money Smart Athlete Blog

Prioritize your spending: Differentiating between wants and needs

Let’s picture a younger version of you, let’s say at the age of 12. Remember how excited you were when a relative would hand you a twenty for Christmas or maybe for your birthday? You would immediately start thinking how much candy you could buy from the candy shop or how many times you could play a game at the local video arcade. Back then, that twenty was enough to satisfy your wants, while your needs were probably satisfied by your parents. Needs are the things that you cannot live without or living without them would cause hardship and distress, such as a roof over your head, enough food and water to maintain your health, basic healthcare and clothing. Wants are everything that goes beyond needs, a big house, branded clothing, fancy foods, a luxury car.

Going back to our example, we can see that our needs and wants definitely increase as we reach adulthood and that different people will have different wants and different needs. Differentiating between needs and wants seems easy but in reality it’s not. A whole science, marketing, was created to shape our needs and wants by influencing our mind set. Inability to differentiate between our needs and wants causes many people to spend their money recklessly ending up living paycheck to paycheck, including many athletes.

If you find yourself in such a position or in order to avoid finding yourself in such a position you should seek for balance in your spending and make smart spending choices. There is a simple rule you should follow: “Spend money on the things that you need before you spend money on the things that you want.” Spending your money following this rule does not, at all, mean that you should only buy the things that you need.  Life is meant to be lived, not survived. Treat yourself to some wants, but do so when you can afford to, and enjoy those wants as the extras that they are.

As a professional athlete you are faced with conflicting choices: Your desire to prepare for a comfortable financial life after sports versus the impulse to live for the present and enjoy your earnings now. You need to find a balance between these competing desires.

Start by understanding your spending habits and patterns, how much money you are currently spending on your needs and how much on your wants. Something which will allow you to both save more money for the future and be able to spend money on things you want to do now. Write down where you currently spend your money, in a notebook or using one of the many free mobile apps and try to review your expenses on a weekly basis. That way you can easily catch things you have spent more than you planned and adjust your spending accordingly.

If you find tracking your spending is too constraining, then you can create an account with money that will be used purely for spontaneous spending. Knowing there is money for solely that purpose can help you protect the money you have in your other accounts.

Setting clear short term and long term goals makes it easier for you to be happy with your spending choices. If for example you have plans to start your own business after the end of your career then your choice not to buy a new sports car, won’t seem so difficult.

Following our suggestions can help you have money for both your current needs and wants.

For help on prioritizing your spending you can contact us on [email protected]