Jason’s Note: Today, we have a post from Michelle B, who is a freelance writer and blogger who writes on all kinds of personal finance issues. She has some great thoughts on determining differences between wants and needs and what you can do to help you achieve your financial goals. Enjoy her sage words of wisdom.
How to strike a balance between “wants and needs” to achieve financial dreams
People often get confused between “wants” and needs”. Because everyone’s perceptions are different. And many a times it depends on financial capabilities as well. When you accumulate a lot of money, you may buy things that you want apart from the things that are needed on daily basis. So, if you want to achieve your financial dreams but are struggling to differentiate between your “wants” and “needs, then it’s a must read article.
Conflicts between your “needs” and your “wants”
You must have wondered what really your want is and what your needs are. It’s quite confusing though , but you do need to control your spending so that your wants don’t overshadow your needs. Your wants must be only when you have money to spare and after you have purchased the things that you need.
For instance, there are many times when wants may become needs such as a TV set. The TV set is completely a want but you can’t even think of a day without it. Thus it becomes a need.
Around 20 years ago, there was no television and still people lived happily. But now, it’s completely impossible to think about a day without watching our favorite television programs. The reason behind these things is the purchasing power that has increased so much. The things such as air conditioners, home appliances and other exotic goods were beyond people’s reach few years ago. But now, people can afford those things because the value of money has increased and even the purchasing power has increased.
Before, people were happy with just one car, but now they need more than two cars for various purposes. Apart from the television sets, they also need cable connections and from one TV set it has increased to 2 or 3 TV sets per household.
You may not know when the affordability factor helps you get all these things. When you couldn’t afford these things, you were happy with few things and when you had more money, you bought more. So, the more you have, more you’ll need. Here starts the conflict between wants and needs.
Have less wants to save for the future
If you want to achieve your financial dreams, then you should think in a constructive way. Otherwise it will be difficult for you to fulfill your financial dreams. May be you’re working hard but all your hard earned money is going towards your extravagant life. So, if you start saving more and cut down on your spending, then you can easily save for the future as well.Try to purchase the things you need. It’ll help you save for the future.
For instance, you may have a family of three but you have a huge house to maintain. But apart from 2 bedrooms, you can rent-out the rest of your house so that you can save that money and use it for the future. You’re also helping a person or another family to have a shelter who cannot afford a house of their own. If you’ve enough clothes and shoes, you can sell the rest on a garage sale so that you get your money’s worth as well as save for the future. Try to cut down your wants so that you can contribute more towards your needs and save money.
5 Steps to achieve financial dreams
Here are some effective steps you can take to achieve your financial dreams:
1. Set a goal
The most important part of your financial dream is saving money. So, you should start saving money and for this, you’ll have to prioritize your goals. Thus, you can understand how much you need to save and within which time. Once you set a goal, you’ll have that urge to work towards achieving it. Make a to-do list and move accordingly.
For instance, Alan has a dream to buy a BMW car in the next 2 years in Atlanta. Here, Alan has already planned his goal and he knows how much money is required.
2. Be practical to achieve your dreams
Now comes your financial responsibility to achieve your dreams. When you’ve set a goal, you should work hard to achieve it. Planning is the key to any goal. The first thing you should consider is developing a budget. Once you start tracking your expenses, you can minimize the unnecessary expenditures and can save more. That money will help you to achieve your dreams.
3. Invest as early as possible
Try to make some investments as early as possible to make more money. Research properly and increase your knowledge to make wise investments. You should learn to be patient because the market has its risks and rewards too.
4. Plan for your retirement carefully
You might have your kid’s education liabilities on your shoulder but that doesn’t mean you’ve no right to think about the retirement. Try to set up your goal according to your need including your kids education and the retirement planning. It will be your biggest blunder if you side track your retirement saving. Remember, what you’re buying now at $1 can be available at $2.5 by the time you retire.
5. Seek help from financial advisor
Only saving money, budgeting and investing is not enough. You need to clarify whether or not you’re on the right track, especially before selecting insurance. It’s very important to get right insurance coverage in order to save money and get the best quote as well. An advisor can help you to select the best option amongst many.
Proper financial planning and savings must be the mantra of your life in order to balance your wants and needs.The main thing that you need to do is start a savings account and put money in it each month efficiently. Start working now in a smart way to secure your future and balance your needs as well.