Determining Financial Needs and Wants

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All of us, no matter what age, struggle with determining the difference between something we need versus something we want. moneymoneyWhile we may face this struggle in our everyday lives, many people may not realize that we face it when it comes to our money management. Let’s take compare some financial needs versus financial wants.

Insurance vs. Investments
Many people are enamored with what their investments can enable them to achieve-buy a house, retire, pay for education, etc. However, if you haven’t done proper insurance planning, the money you’ve worked so hard to save can be wiped out due to unforeseen costs. When it comes to building towards your future, it’s important to have a defensive mindset and build on a stable foundation. As tough as it may be to allocate some of your savings toward insurance rather than toward your investments (because doing so means reaching your tangible goal of a house, retirement, etc. may take longer now that some of your money has been diverted towards insurance), insurance planning is essential in protecting the money you’ve worked so hard to accumulate.

Retirement vs. College
People need to save for retirement and want to save for college, but many see it the other way around and implement their savings strategy accordingly. It’s natural for parents to put their children’s interests ahead of their own, and while saving for retirement rather than saving for college my not initially seem so, it may actually be in your family’s best interests. After all, if you don’t have enough saved for retirement, the support you may need could ultimately fall on your children’s shoulders and create future financial burdens for them.

Remember your children can borrow money and earn scholarships for their college education, but you cannot do either of these for your retirement. Additionally, if you place an emphasis on saving for retirement and have enough money to one day be financially independent, you could always choose to use some of your retirement money to help your children pay off their student loans-that way, you have more flexibility with your money.

Planning Ahead vs. Operating on a Whim
Planning ahead starts with a budget. Having a budget can alleviate a lot of stress in your life and help you feel more in control of your finances, especially in the face of uncertainty such as being laid off or unemployed. Unfortunately, budgeting gets a bad rap-most people look at it as a chore. I like to look at budgeting as creating a plan to live the life you want. Budgeting and good financial habits will allow you to prioritize what really matters and make your goals a reality.

Budgeting isn’t just something you do when you’re starting out in life-it’s important when you’re retired or planning to retire as well. Knowing how much of your salary is covered by your investments and making the appropriate adjustments to expenses is key during retirement if you want to stay retired.

Get Help in Determining Financial Needs vs. Wants
Sometimes it can be difficult to choose between financial needs and financial wants. Making sound financial decisions takes time, research and discipline, and it can be tough to do on your own. A financial advisor can help guide you through the needs, wants and everything in between.

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