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Knowing What You Want Out of Life

Financial necessities—an emergency fund, the right accounts, good insurance policies—all can be the step between being comfortable and feeling secure, and fearing that you may lose everything that you've worked for. Once you're secure that you've got all your needs covered, you can begin to think about the things you want.

Maybe you want to build a great portfolio, or perhaps you've been dreaming of a fabulous vacation to the Australian Outback. A little vacation home might be nice, or maybe now's a good time to think about upgrading your car. Let's have a look at some of the wants you can think about after your needs have been met.

A Tropical Paradise for Two

Maybe you've put off vacations for a while, opting instead to use that money to buy and furnish your home, braces for the kids, a new car here and there, and so forth. Your ­vacations may have been pretty much restricted to a day or two at the beach, or a quick get-away to a nearby city.

Finally, though, you're able to think about a real vacation. Maybe you'll take your family to Disney World for a week, or you and your spouse will finally visit the Eiffel Tower. It's great to be able to plan to do something you've wanted for a long time, but take a minute to weigh the cost of a great vacation against the security you want to have in retirement.

We're not saying that you shouldn't see the Eiffel Tower—no way. The opportunity for travel is enriching and broadening. We're saying, however, that maybe you don't need to sail to Europe on the Queen Elizabeth II and stay in the most luxurious Parisian hotel.

Great trips are wonderful, but they're a luxury. Just make sure you don't go footloose and fancy free at the expense of your mortgage and retirement fund. And watch that you don't run up outrageous credit card bills that you'll end up paying until it's time for your next vacation.

A Cozy Little Cabin

Maybe you're at the point now where your mortgage payment is very manageable, or you've even got it paid off. If so, you might be considering buying a vacation home.

A vacation home can be anything from a hunting cabin in the mountains without running water or electricity to a luxury condo on Maui. What you get depends on what you want, and what you can afford. Some folks love roughing it in the woods, while to others, the only vacation spot worth considering comes complete with all the comforts of home and a beautiful beach.

A vacation home can be a good investment and a means of getting a break at income tax time (read more about that in Tax Advantages to Owning a Second Home), but again, it's definitely a want—not a need. If you've paid off your home or have a very manageable mortgage, you have the funds needed for your children's college educations, your car payments are under control, and you don't have any other outrageous bills, a second home may be within your reach.

A BMW of Your Very Own

If you've never had a brand-new car, or at least one that you really liked, you might be thinking now about the perfect machine.

Maybe you're ready to say good-bye to the stodgy station wagon or van you always needed to haul around your kids, their friends, and all their gear. Maybe the sedate sedan you've been cruising in just doesn't do it for you anymore. Perhaps you're looking for something with a little more style.

Luxury cars are expensive, there's no question about it, and frankly, unless you've got more cash than you know what to do with, we just can't see spending $30,000 or $40,000 on a car. If you're in a comfortable financial position at this stage, however, and you've always wanted a BMW, go ahead and give one a test drive.

This may be the point in your life when leasing a vehicle makes more sense than buying it. You don't need a big down payment to lease, and you normally can afford to lease a car that you couldn't comfortably afford to own outright.

Leasing is the practice of paying a specified amount of money over a specified time for the use of a product. It's similar to renting, although some types of leases allow you to buy the vehicle at the end of the contract.

An open-end lease permits you to buy the vehicle for its residual value at the end of your agreement. The residual value is what a car is worth at the end of a lease agreement, and the amount you'd pay to buy the vehicle at that time. A closed-end lease agreement states that you simply turn in your vehicle and walk away.

There are some good reason to lease a car, and also some good reasons not to.

There are many more wants in which you could indulge yourself if you're financially able to do so. You could buy a boat, hire a decorator to do your house, or refurbish your kitchen. It's not wrong to want things, or to buy the things that you want. Just make sure you take care of the needs first.

More on: Family Finances

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Excerpted from The Complete Idiot's Guide to Personal Finance in Your 40s and 50s © 2002 by Sarah Young Fisher and Susan Shelly. All rights reserved including the right of reproduction in whole or in part in any form. Used by arrangement with Alpha Books, a member of Penguin Group (USA) Inc.

To order this book visit the Idiot's Guide web site or call 1-800-253-6476.


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