Managing money correctly is not an easy task. Many times we fall into different temptations where unnecessary expenses can play tricks on us, or sometimes, we simply do not have enough money to save and have backup in case of any need.
However, with good financial planning, you can create different strategies to best address the different scenarios and situations that arise in your life.
The financial planning process is divided into 4 stages:
- Set your goals in order of priority;
- Define deadlines for achieving these objectives;
- Identify your goals and create a budget for each (opening a savings account or creating new sources of income, for example);
- Measure and control your financial decisions so you don’t lose control and discipline.
By following these 4 steps plus the tips that we will give you in this guide, you will be able to achieve your goals and objectives satisfactorily. Choose the topic that interests you the most and start learning about financial planning right now:
8 ways to fill your piggy bank
There are many ways to improve your personal ability to save. Some are quick and easy to implement, such as cutting off water while brushing your teeth or turning off lights you’re not occupying.
Others require a little more time, as is the case of allocating a monthly amount of income for investments.
Here we show you some alternatives that require different levels of dedication and effort, ordered from the easiest to the most complex.
1. Follow the 30-day rule
It is the easiest practice to implement, but at the same time the most difficult to follow. Simply wait 30 days before purchasing items that are not of basic necessity and resist the temptation to buy.
After a month, you will have forgotten about the item or your impulse will have calmed down.
2. Save the return
Nowadays there is little return that we handle, thanks to the facilities of plastic money.
If you use cash for small purchases, store what’s left over in a piggy bank or something that prevents you from taking that money out until the container is full; allocate that money to get out of trouble or for the purchases of girls in the house.
3. Limited budget
Basically, it’s running on a spending cap. In the case of debts, banks normally recommend that the person not go into debt for more than a range of 60%-70% of their total income. Apply the same rule to your expenses.
4. Eyes on the target
Never walk into a store or supermarket without clarity of what you need to buy.
Have your list handy, on your cell phone or on paper. However, it should be noted that making a list is not enough; follow these tips the next time you’re in front of the gondola or display case.
- Check the due date. For everyday groceries, expiration dates may be closer to the day you bought them. But if you want to freeze or store in the pantry, better buy freshly labeled products.
- Take advantage of the discounts of the day. It is always good to check the catalog or the discount magazine of the moment because it includes many basic consumer products. Look at the price per unit that always appears in the fine print
- Use the nearest supermarket. Organize your trips to the super in such a way that you can walk; you will force yourself to buy just enough and necessary to not go with a lot of load. This will do good for your pocket and your back
- Use an eco-friendly bag. Many supermarkets offer sturdy and largely supported bags to carry shopping. They are easy to use and compact to carry in your backpack or purse. Don’t buy beyond what the bag can support.
5. Apply automatic control
Pay for household or personal expenses in cash and automate large amounts in the case of basic services.
- Use cash for minor expenses for an amount that suits you.
- Leave your credit or debit card for larger purchases or fixed expenses, or arrange payments using Automatic Checking Account Payment (PAC) or Automatic Credit Card Payment (PAT) services.
6. Save gradually
Set a low savings limit that accommodates you at the beginning; that does not exceed $ 10 thousand at first.
Every one or two months, reevaluate whether you can increase that amount a little more, for an amount that still accommodates you, say between $1,000 and $5,000. Put on a one-year horizon and forget about that money.
Keep it away, either in a closed piggy bank (the only option to open it is by breaking it), or through some short- or medium-term financial product and quick rescue.
7. Divide and conquer
Separate the amounts you allocate for expenses from those you have planned for savings. Avoid hosting them in the same view account or checking account.
Transfer a fixed amount every week to a savings, debit account, or a financial product, such as a mutual fund, APV, or Account 2, depending on the investment term you have to occupy that money.
If your income is not enough to cover monthly expenses, and your ability to save is not enough to achieve your goals, you are being part of a problem that affects a large part of Americans.
Going to some credit or loan to solve this problem is not always the best option, since you will finally be involved in more debts and tremendous headaches.
8. Go into Japanese mode
The Japanese knew it first of all: the key is in order, and that’s how they developed the Kakebo method, which consists of writing down all the fixed, variable expenses, and income of money of the person or family, separated into categories (household expenses, personal expenses, leisure, food, etc.).
Why do we put it last? Because in all the practical ways you can save, it requires time and exclusive dedication, and a change of habit.
The system consists of making a daily and weekly monitoring and review of expenses, and includes making commitments, for example, leaving aside a fixed amount only for emergencies or a minimum balance in the current account.
Like all Japanese, he understands both a philosophical and a practical aspect. By requiring daily dedication, the person quickly visualizes where “the money is going,”and can separate between unnecessary purchases and basic necessities.
Regardless of how you do it – using a notebook, apps on your cell phone or computer, or with a template in Excel – the point is that you visualize your money.
Instead, having multiple sources of income could become the best decision you can make.
Imagine that by earning an additional $250,000 each month,you could pay off some or all of your credit cards, your children’s school credits, common expenses and basic bills, or even save to achieve some goal you have in your life.
If you think that achieving financial freedom through extra income is complicated, you are wrong. You only need motivation and an initial investment to start new projects.
We already know that starting the month on a low budget is a normal situation in many people’s financial lives. However, some measures would help solve this problem.
For example, according to the latest Global Survey on Consumer Confidence, Concerns and Purchase Intent conducted by the research company Nielsen, Americans are reducing spending on out-of-home entertainment, and it is very likely that this is the item that you most need to improve to make ends meet. To solve your money problems, you should start by answering the following questions:
1-Do I really need it?
Before you buy anything, it’s essential that you ask yourself if you really need it. It may be a basic question, but on many occasions we forget to ask it for the impulse to buy.
- Is it time to make this expense, do I need it now or can I postpone it? And most importantly: do I really need it?
Probably, if it is not within your fixed expenses, the answer will be “no”. This question will help you make a more conscious and responsible decision. Avoid “taking advantage” of offers and promotions that seem very convenient, but are perhaps completely unnecessary for you at the time.
2-Is there a cheaper alternative?
If you decide to make a purchase despite having a tight budget, the main thing is to quote and compare. It may be that at another time of the month or at the end of the season, the same product is discounted.
We also recommend that you review the discounts you can access. Banks, clearing houses and telephone companies, among others, usually have discounts in associated shops. Use these benefits whenever you can.
3-What did I overspend on?
It is not comfortable for anyone to analyze why the monthly budget did not reach, but it is essential if you want to avoid this happening again next month. Only by analyzing your expenses in detail will you be able to understand when you left the plan.
We already told you what are the typical reasons why you fall short of money, and we remind you that it is important that in order not to allocate more than 10% of your salary to the “gustitos”. In this way, you can avoid being left with the account in negative.
4-Is my salary enough for the lifestyle I lead?
If you end the month very tight or with money against it is evident that there is something wrong with your personal finances and planning.
What percentage of your salary do you allocate for fixed expenses? These are all those that you must maintain month by month. Under this item you can consider the lease or dividend, tuition, payment of credits.
Although it may seem like a complicated task, doing this calculation is very easy. There are even websites such as the National Consumer Service (Sernac),which help account for all the income and expenses of a person. This way you will be clear if you can really afford the lifestyle you lead.
Also, you should consider a percentage for the variable expenses that you must cover month by month. In this concept you must include everything from gifts to outings. The main thing is that you have an estimate, so you can plan.
Avoiding bad times at the end of the month is very easy if you start to order the expenses. Discriminating between what is necessary and unnecessary is key in this process.
Although we all have unexpected expenses, you always have to determine an amount to cover them. This is the best way to have a plan and give yourself a taste without regretting it later.
Managing money correctly is not easy. Many times we fall into different temptations where unnecessary expenses can play tricks on us.
Other times we simply do not have enough money to save and have backup in case of need.
However, with good financial planning you can make better decisions if you are looking for how to achieve financial goals.
This is the key to creating strategies that allow you to address the situations that are foreseen in your life.
Achieving your goals – especially financial ones – is synonymous with success. We hope you find this guide useful for this.