Two of the biggest things that financial planning can give you is clarity and understanding.
And understanding your needs versus wants is important.
The distinction between what you want and what you need is key. It is okay to buy the things you need, but when it comes to things that you only want, then knowledge, understanding and thinking comes into the process. Can you afford it straight away? Is it best to save up, or to wait and see if it gets cheaper, or if you still want it in the future?
You might think that one of your financial priorities is to get rich, travel the world, have a wonderfully-paid job, or indeed have the best, most up-to-date, technologically advanced television! But the thing is: you still have to pay the mortgage, or rent, make sure you can cover your bills, and eat. Pretty important stuff, agreed?
When determining your financial priorities, you need to understand and identify the differences between needs and wants.
A need is something you must have; something that you need to survive. You need a roof over your head, food to eat etc. A want is something that isn’t necessary but may add value or bring something like happiness to your life.
When it comes to financial priorities, your wants can often trump your needs. But always remember, you have to factor in your needs.
Know what’s important to you. If needs be, write it down.
Determining your financial priorities comes down to one critical thing – and that is knowing what is truly important to you. Your money is used as a tool to achieve your life goals.
It is all about priorities – and getting the right ones in place, and in the right order.