Financial Literacy: Needs vs. Wants
Financial literacy can improve the ways you manage your money and help you make smart financial decisions. Let’s take a closer look at what financial literacy is 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. 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
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.
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.