Necessity, as per oxford dictionary is something we must have and can’t manage without. Food, clothes and shelter (roti, kapda aur makaan) is treated as necessity from ages but there has been a complete revolution about how people see things these days and the definition of the necessity is being altered as per the human comfort. Of course we all know that luxuries are diamonds, Mercedes and other valuable things we desire but are way too expensive for us, is that it? Does luxury means everything we can’t have? No. There is just a fine line between necessity and luxury and sometimes it’s not even clear whether the particular item is a luxury or need? Is the newspaper a necessity because it keeps us well informed or is it a luxury because we can anytime surf free news off the internet? What about cellphones, laptops and air-pods, are these goods the necessities above food?
The economists have in time used different methods to draw this line between the necessity and luxury but it tends to move as the world changes. Say for India, even with the sky rocketed price of gold, it is still more of a necessity than a luxury. As per the survey conducted, overall 87% of households in India owned some amount of gold when we know that a 2/3rd of population (about 68.8%) lives in poverty. In the book Poor Economics, Abhijit Banerjee shared the personal interviews of the people in the remote areas of morocco who didn’t have much to eat but evidently have a television, DVD player and a dish antenna in their homes. On asking they laughed and said “oh! But television is more important than food.” The main reason for this as per the author is that life in remote areas is extremely boring and depressed, television and DVD players act as a source of entertainment and often help them go through with all the sufferings. This reason also explains why poor spend so much in the weddings because these are the moments that bring excitement in their lives. In India, even an extreme poor spends 14% of his budget on the weddings alone
Luxuries are becoming modern day’s necessities and the need for pleasures in life is the main reason for the low spending on food. With so cheap consumer goods, low talk time cost and television signals even to the remotest area, people are spending way too much money on them instead on food, health and education. Rather to change their lifestyle through some extra work, they have accepted their destiny and made it tolerable with these cheap luxuries. The fact is, there is no universal line between the necessities and luxury; it is flexible depending upon the age group, income group and the motive of the person. Evidently, 95% of the younger generation believed that cell phones are necessity where only 30% adults agree to it. It also depends on your social circle, if all your friends has Mercedes than you’re more likely to think of it as a necessity compared to if no one has.
Spending on luxury is not completely a dumb idea; we all have desires and a complete right to fulfill it. What a rational person must do is look at its living conditions and cut off his luxuries as required. One should always remember the balanced money formula by Elizabeth warren in the book All Your Worth: The Ultimate Lifetime Money Plan – that a person should spend no more than 50% of his income on must-haves (necessities) and no more than 30% on wants (luxury) while keeping the rest of 20% as savings.