Please stay tuned for important disclosure information at the conclusion of this episode.

Welcome to a special episode of Investing Insights. I'm your host, Ivana Hampton. The start of a new

year marks a time of likely wanting to improve your financial health. You may promise to

spend less, save more,

and manage your money better. And old financial habits tend to make those New Year resolutions,

challenging to keep, but don't give up. Morningstar, Inc.'s director of financial psychology,

Sarah Newcomb, has written about money management, and she says a change in mindset can help you develop

a financial plan.

Here's part one of our conversation.

Hi, Sarah.

Hi.

So financial advice tends to tell people to break down their budgets needs versus wants.

What are your thoughts on this concept?

Yes, I hate this concept.

I know you know that. It's not, I mean, there's nothing really wrong with the needs versus wants in one sense,

but what it does is it actually runs counter to the way that our human motivation runs.

So just to put some context on it, when we say this, you have to know the difference

between a need and a want. It's, you know, it's well-meaning. What we're trying to say is you need

to prioritize your spending, right? And understand that some things are necessary, some things are not.

The problem is that think about Maslow's hierarchy of needs. On that hierarchy, we've got down at the bottom, we've got our physical needs, then our physiological needs, and then our emotional and social and some needs for meaning and purpose.

And the thing that the needs versus wants paradigm does is it basically says if it's not down at the bottom of Maslow's hierarchy,

it's a want. But if you actually go and read Maslow's work, he was very clear that the hierarchy

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