Discerning Luxury from Necessity

Golden Nut Photo by Petr KratochvilI’ve seen several threads on forums where individuals in debt have posted a general plea for help in reducing their debt and most people simply respond by telling them to cut spending. But how to cut spending and decide what to cut and what not to cut? This is where you have to discern luxuries from necessities.

A necessity is an item/service that you simply cannot do without in your everyday life and that is vital to your survival and situation.

A luxury is anything that is not a necessity.

A few examples of necessities (or necessary expenditures) would be:

  • Food
  • Rent/mortgage
  • Auto insurance
  • Home insurance
  • Health insurance
  • Gas
  • Auto Maintenance
  • Utilities: electricity, gas and phone

Of course these are not the only necessities in the world, and it’s different for everyone, but when you really think about it, true necessities are actually quite few in number, and many things that you think you need are in fact not that necessary.

A few common examples of luxuries would be:

  • Entertainment – movies (at the theater, renting, or buying), music and/or books
  • Cable or satellite
  • Toys and games (video or non-video)
  • More than one home phone line
  • More than one computer (even one computer could be considered a luxury in dire circumstances)
  • High speed internet service

Even in one of the main necessities, food, there are luxuries that aren’t necessary. Necessary foods are foods that are vital for your health and continued existence. These are usually basic foods and staples that fill out your food pyramid and keep you in good health. Any food that is not vital to your health and survival should be regarded as a luxury.

A few examples of luxury foods when grocery shopping would be:

  • Chips and other junk food
  • Cookies and other sweets
  • Gourmet cheeses
  • Alcoholic drinks
  • Soda and other bottled beverages
  • Bakery goods
  • Specialty breads i.e. foccacia
  • Seasonal and tropical fruits
  • Fancy meats (i.e. steaks)
  • Pre-prepared and packaged foods (sandwiches, salads, sushi, cut fruit, etc.)

I say “should be regarded as a luxury” because I think it is important to understand and appreciate the difference. I am not saying that your life should be completely stripped of all pleasures and comforts, but when you are purchasing a new DVD or CD, it is important to be aware that what you are purchasing is a luxury item.

So, the first step in trying to figure out how to cut your expenditures is to go through your regular purchases (including services) and distinguish all luxuries from necessities. Luxuries should not be regarded as “forbidden” because it could turn into an obsession (the desirability might be blown out of proportion), but be aware that by choosing not to purchase these items, you are gaining an advantage.

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7 thoughts on “Discerning Luxury from Necessity”

  1. good post. still surprises me how many people do not realize that prepacked food does not qualify as a requirement. or cable. then, ive been known to spend cash on vidio games instead of food…

  2. In working with clients on cash flows I find that the Quicken term ‘discretionary’ works better than ‘luxury’ because discretionary sounds like you’re making a choice, whereas luxury has a guilt connotation. A luxury sounds like something you probably shouldn’t have. Also, although I agree with your categories re: necessary expenses, most people can reduce what they spend on necessities.
    .-= Susan Tiner´s last blog ..Bulk Shopping Pays Off =-.

  3. This makes good sense, except one item: “seasonal fruits.” Eating fruit that is in season within one’s geographic region is far less costly than eating fruit that is out of season and trucked in. Of course, certain high-labor crops are expensive, but generally, sticking to seasonal staples like apples, pears, melons, peaches, and oranges when they are in season, is both healthful and inexpensive.

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