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Ask Yourself: Do You Need to Borrow This Money?
How to Know if You Really Need to Borrow Money?
Be sincere and answer the following 3 simple questions! This exercise can save you a lot of trouble on the long-term. Here’s a short checklist to determine if you really need to borrow money.
Is This a Need or a Want?
You must understand the difference between need and want, especially when it comes to money. Needs are generally related to basic needs: food, shelter, transportation, clothing, employment, and education expenses.
What Will I be Spending the Borrowed Amount on?
An example of a “need” is an oil change after six months for your reliable Toyota. An example of a “want” is rewarding yourself with a shiny, new sports car.
“Do I fix my car so I can keep my job?” is an example of a real need for taking out a payday loan.
Did I Think Twice Before Borrowing Money?
You also must understand your psychology when it comes to needs and wants and how you think about and justify spending money on yourself and others.