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9 Must-Know Financial Concepts

NEW YORK ( TheStreet) -- You don't need a master's of business administration degree to be financially savvy. It just requires a little common sense.

In honor of financial literacy month, here are nine concepts you should understand:

1. The difference between "wants" and "needs:"

Being able to distinguish between the two is essential to making basic financial decisions. Prioritizing your needs doesn't mean you can never indulge in something that's not essential. You just need to consider your "wants" after you've addressed your basic needs.

2. The power of compound interest:

Over long periods of time, small amounts of money can grow as interest compounds and adds to your principal. That's why financial books tell you to start saving as early as possible. Keep in mind that it also works the opposite way when you borrow: You pay more interest as your loan collects interest, increasing the outstanding amount.

3. How to use credit cards responsibly:

Credit cards can be useful tools or a way to destroy your finances. Understanding how credit cards work and how much balances can cost over time is crucial.

4. How to live within your means:

If you make less than you spend, you need to find expenses to cut or ways to increase your income.

5. How to plan for the future:

You must know your financial goals before you can create a plan to reach them. They might involve paying your child's college tuition and saving enough to retire early.

6. Understanding contracts you sign:

When you sign a contract, you need to read the fine print and know all the terms involved. Failing to understand a contract thoroughly can get you into trouble later.

7. How to create and maintain budget:

By tracking your spending and knowing where your money is going, you'll be able to work toward your financial goals.

8. How to protect your assets:

Staying financially sound requires you to prepare for unexpected events, such as death and natural disasters. You should know how much insurance you need to protect your assets. After you've figured that out, you'll need to adjust it as your needs change.

9. How to do your own taxes:

Most people spend a lot of money on taxes. That's why it's important to know whether you're taking advantage of all the deductions and credits available to you.

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