Personal finances are based on the application of correct financial principles, but in the most immediate environment of the person when it comes to managing their resources or those of the family: their income, expenses, habits, level of savings, their goals for the future and the dreams that inspire him every day.
But as we always say on this blog, the health of our personal finances depends on our discipline, commitment, and clarity.
Therefore, today we want to share 3 essential recommendations to start building a better relationship with money.
- Diagnose where we are at the moment financially. That means, identifying how much our total income is each month, what our fixed and variable expenses are, and our level of indebtedness (how many debts do we have, how much do we pay in interest each month, how much do we need to finish paying off the credits, is it possible to make a debt consolidation, why and when we got into debt).
Having a map that adjusts to our financial reality can help us to know if we need to change some of our spending habits or if it is important to find, in the short term, other economic activities that generate income.
We cannot pretend to improve our financial situation if we do not even know what it is.
- Make (and stick to) a monthly budget. Having already diagnosed our financial situation and having greater clarity on how we manage our money, the first step is to make a budget.
On the internet there are many tools to create budgets; There are also mobile applications that can help us keep better control. Even with a simple Excel sheet we can make a monthly budget.
But the blade, app, or tool alone doesn't do much. It is essential that we stick to that budget. If you say that we will only spend 50 colones a month on fruits and vegetables, we must find fairs or greengrocers where buying what we need does not exceed that expense.
This is especially important with respect to the ant expenses, those that we do almost every day because we think that they do not represent much, that they are insignificant things, but when added together they give us an expense that is important. For example, buying a coffee for a thousand colones every day we go to the office. At the end of a month there are more than 20 thousand colones. Or order food at home, often.
- Create an emergency fund. Open a savings account and deposit some amount of money, even if it is 10 thousand colones, each month. That will prompt us to adopt a just and necessary habit; that of reserving, even a minimum amount of our income for urgent expenses or emergencies.
We can set a goal, for example, that the emergency fund is one million colones, and continue saving without using our savings until that figure is reached.
- Design a debt release plan. With the diagnostic information we can determine if we are over-indebted. In any case, if we have more than one loan, it is important to assess a debt reunification and execute a plan to pay those debts; it may be that paying off debts also requires a change in habits, reducing some expenses and generating extra income.
Anyway, if you are thinking of improving your personal finances next year, 2023, visit any of our branches. We will be happy to advise you and help you achieve the financial freedom you deserve.