This ” Basics of Personal Finance: Know These 5 Things Before Fixing Your Finances” is my article written for Rich and Happy Blog. The heart of the post revolves around knowing the things you need to address before you try and fix your own finances. These basics of personal finance are something that people overlook but are really important. This post contains affiliate links/ads. See disclosure policy.
Many of us really aspire to get a handle on our finances. Many of us find the best way to do so is by hiring finance professionals. On the other hand, some (will) try to do it on their own by educating themselves, by trials and errors, among others. The truth is there are countless ways to fix your own finances.
The Basics of Personal Finance
As I always say, your personal financial situation may be or may not be different than other people. This means that your ways of fixing your finances may entail the same or different strategies as many people adopt and execute. That being said, there are basic things you need to know about personal finance, that is, fixing your finances. Here are the main five:
Know Your Financial Situation
Have you ever solved a problem when you didn’t know what it was in the first place? I would assume the answer to that is probably not because if you have, then you are a mad genius. Kidding aside, fixing your problem means that you must first know what your problem is. The same reasoning is applicable to fixing your finances.
You must understand your situation, how you got there, what its repercussions are to you, among others. Through understanding your situation, you learn how to identify your mistakes or where you made mistakes. You are able to come up with solutions or formulate better financial plans. In the process, you not only learn but also you become a better person in the process.
Needs vs. Wants
Needs and wants are different words with two different meanings. Unfortunately, a lot of people get these two words mixed up or confused.
Distinguishing or differentiating a need from a want is somehow difficult to do nowadays. There are so many products and/or services out there that are wants but disguised as true needs. As an example, many people will say they need to buy new smartphones phones because of the style, features, functionality, and so many things. They say they need these in their lives but truth is they just want them.
I’m not saying buying products that you want is a small or big mistake. What I’m saying is that if you are fixing your finances, one of the best things to do is to identify your needs and stay away from the wants. Needs are necessities. Wants are things that you can surely live without.
Remember even small amount of savings can make a big difference in your attempt to fix your finances.
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