Income, or the ability to meet basic living expenses, is the first of the financial needs, and it can come in many forms, including government benefits and family transfers. This income is essential for a healthy life and basic security. Other financial needs include the ability to save for a rainy day and invest for the future.
Other financial needs include rent, groceries, and insurance premiums. You may also have a public transit card, car payments, or medical bills. Expenses for healthcare, such as copays and vision and hearing aids, fall into the category of needs. In addition to these, you may have investments, retirement accounts, or 401(k) plans.
It’s crucial to understand the difference between needs and wants. Certain things, such as a new fall coat, are considered a need, but a brand-new car is a want. If your car is working, you can justify spending more on a new model. But don’t be too rigid in defining what is a “want” – a few items may fit into both categories!
The next step in determining whether you qualify for financial aid is to write a Statement of Financial Need. The Statement should explain the reasons for your need, including any changes in your financial situation. It should explain how unanticipated expenses or shortfalls have affected your finances. The statement should also show that you have been responsible in handling your money. If you’ve paid for your own education, make sure you mention that you did so. Do not mention any car loans, however.
A financial needs analysis is an important first step in creating an overall financial plan. It helps you identify your goals and needs and structure your spending accordingly. Once you know what your needs are, you’ll be better able to purchase appropriate financial products to meet those goals. In addition to helping you make the right choices, a financial needs analysis helps you identify any gaps in your plans.