Needs vs. Wants
Financial literacy can improve the ways you manage your money and help you make smart financial decisions. By knowing the differences between your needs and wants and creating a budget, you may be able to optimize your spending and meet financial goals. Let’s take a closer look at how financial literacy works, what needs and wants are, and how you can differentiate between your needs and wants when creating a budget.
What is financial literacy?
At its core, financial literacy is the knowledge and skills you need to effectively manage your finances, including needs and wants. Having an understanding of financial literacy is essential if you’d like to meet your short-term and long-term financial goals. These skills can help you make the most out of your money and avoid financial hardship in the future.
Financial needs vs. wants
Financial needs are necessary expenses that allow you to live and work. Financial wants, on the other hand, are expenses that can help you live a more comfortable life. Needs and wants can vary based on your financial situation and preferences, so your “needs” may be “wants” for someone else and vice versa. By understanding the difference between your needs and wants, you can achieve financial literacy.
Identifying your financial needs
Your financial needs are essential for your day-to-day life. In most cases, they’re ongoing expenses that cost you a big portion of your income. Here are some examples of financial needs:
- Gas and electricity
Identifying your financial wants
Your financial wants are expenses that you pay for because they are enjoyable to you and can improve your life. While you could live without financial wants, you prefer to keep them in your budget as they make you happy. Financial wants may include the following:
- Dining out
- Designer clothes and shoes
How to budget for needs and wants
To maintain financial literacy, you have to budget for your needs and wants. You should choose a budgeting method that can help you work toward your spending and saving goals, such as the 50/30/20 budget. With the 50/30/20 budget, you can allocate 50% of your income for needs, 30% for wants, and 20% for savings. This method can help ensure you have enough money to pay for what you need and want while encouraging you to save.
How to create the 50/30/20 budget for needs and wants
Here’s how you can create a 50/30/20 budget for needs and wants:
1. Calculate your income
The first thing you should do is calculate your monthly income, which may include your salary and any side hustle earnings. This is how you’ll be able to decide how much money you can spend on needs and wants, and how much you can put toward your savings.
2. Categorize your expenses
Create a list to categorize your expenses as needs and wants. Your needs, or essential expenses, may include rent, groceries, and monthly bills. Your wants, on the other hand, may be non-essential expenses like monthly subscriptions, going out to eat at restaurants, and vacations.
3. Create your budget
Now that you’ve calculated your income and categorized your expenses, you can create the 50/30/20 budget. Designate 50% of your income toward covering your needs and 30% toward your wants, putting the remaining 20% toward your savings.
4. Stick to your budget
Once you create a budget for your needs and wants, you can implement it in your day-to-day life. It can be wise to use a budgeting app or spreadsheet to manage your spending better and make sure you’re on track. If you stay consistent, you’ll gradually build up your savings, eliminate unnecessary spending, and become more financially secure.
Loans that can meet your financial needs and wants
If you need financial help right away to meet your needs and wants, you can consider getting a loan. Here are some loan options that can get you fast funds:
Payday loans are small dollar loans that can help you cover expenses before your next payday. With these loans, you’ll typically receive a few hundred dollars to cover expenses. Then, you’ll pay back the loan in two to four weeks, when you get your next paycheck.
With installment loans, you can receive a lump sum of money that you’ll pay back in fixed monthly payments, or installments. The loan repayment term length may last from several months to years. These loans are a good option if you need a larger amount of money to cover needs and wants.
Title loans are secured loans that allow you to use your car as collateral. With these loans, the lender will appraise your vehicle and offer a loan amount worth a percentage of its value. If approved, the lender will hold onto your car title, and you can keep driving your car as you pay back the loan.
Lines of credit
A line of credit is a loan that can give you flexible access to funds as needed, up to your set credit limit. You can pay back this loan all at once or over a specified time period. Better yet, you’ll only pay interest on the amount of money you borrow.
Advance America loans can help you meet your financial needs and wants
If you need help meeting your financial needs and wants, consider getting an Advance America loan. From payday loans and installment loans to title loans and lines of credit, we offer a variety of financial products that can help you cover expenses right away. You can get approved even if you have bad credit and receive your funds quickly, sometimes the same day you apply or within 24 hours. Visit AdvanceAmerica.net to learn more about the loans we offer and start covering your financial needs and wants today.