Financial needs are the essential expenses that are necessary for you to maintain your basic standard of living. These are expenses that are necessary for your physical and financial well-being, and they typically include things like housing, food, transportation, and healthcare.
On the other hand, financial wants are non-essential expenses that provide additional comfort, convenience, or enjoyment, but are not necessary for your basic standard of living. These might include things like dining out, vacations, expensive hobbies, or luxury items.
It’s important to distinguish between your financial needs and wants because your needs should be prioritized in your budget. This means that you should allocate the majority of your income towards meeting your basic needs, and only spend money on wants after your needs are taken care of. By prioritizing your needs and managing your wants, you can ensure that you are spending your money in a way that aligns with your financial goals and values.
Another key aspect of managing your financial needs and wants is being able to differentiate between the two. This can be challenging, as certain expenses may feel like needs but are actually wants, and vice versa. Here are a few tips for distinguishing between your financial needs and wants:
• Consider your values: What is important to you? What do you value most in your life? Your financial needs and wants should align with your values.
• Think about your long-term goals: Are your spending habits helping or hindering you from achieving your long-term goals?
• Consider your current financial situation: Are you able to afford your current level of spending, or are you struggling to make ends meet?
By evaluating your financial needs and wants in the context of your values, goals, and current financial situation, you can make more informed and financially responsible decisions about how to allocate your money.
*We are not financial advisors and only present our findings. Please do your own due diligence and what you feel you can make work in your own unique situation.