This is how you can change the way you manage your personal finances
In the fast-paced digital world in which we live, social networks have become an inexhaustible source of tips, tricks and recommendations that cover multiple areas of our lives, including personal finance. It is easy to find content on social networks in which they advise you on how to save: from techniques such as organizing money in envelopes categorized by uses – leisure, food and travel, among others – to methods such as depositing the amount equivalent to the money in a piggy bank. day of the current year (for example, if it is the 25th, 25 euros are deposited) or the popular rule of the weekly day without expenses.
Although on the surface most of the techniques that are made known on social networks may be attractive, the truth is that many times those who propose them are not experts in personal finances and, in reality, They seek more to capture and retain attention of readers who offer practical and achievable advice.
Therefore, since INFOVERITAS, we recommend that if you really want to save, you use traditional rules. For example, him 50/30/20 method. This rule, popularized in a book written by Elizabeth Warren, suggests allocating: 50% of income to necessary or essential expenses (rent, food, transportation…); 30% to expendable expenses or whims; and the remaining 20% to savings or investment. In this article we show the keys to saving with the 50/30/20 rule and, if it does not fit your personal financial situation, we suggest other alternatives.
How to set your real budget with the 50/30/20 rule
The first step is to determine the amount of money that these percentages represent according to your personal financial situation. For it, multiply the percentages 50%, 30% and 20% for your net monthly income. For example, if your net income is 2,000 euros per month, your goal would be to allocate every month: 1,000 euros for essential expenses, 600 euros for whims and 400 euros for savings.
- Keep track of expenses
To know where you are when you start applying this technique, the first thing is to understand what are you spending your money on. To make this exercise as realistic as possible, experts recommend analyzing expenses for at least two months and doing so methodically and rigorously. A good help can be to use, for example, the Japanese account book Kakebo, which allows you to track income and expenses, fixed and variable, in an organized way. This will make it easier to set financial goals and better understand our spending patterns.
Once you understand how you spend your income, it is time to classify it into one of these three categories: necessary, whims or savings. It is especially important to differentiate expenses that are truly essential from those that you could do without, although it is not necessarily easy for you to do so. Are a movie ticket, a subscription to an entertainment portal or that last minute fast food to avoid cooking at home really essential? You will see that by using the 50/30/20 rule you will quickly realize how many of your needs are actually masked whims.
- Add the amounts and check if the percentages fit
When you have classified all your expenses, it is advisable that add all the amounts and see if you are complying with the rule “50% for needs, 30% for whims, and 0% for savings.” If you’re close to those numbers, the 50/30/20 rule probably fits your budget.
Alberto Aza, spokesperson for CECA (an association made up of CaixaBank, Kutxabank and Cajasur Banco, Abanca, Unicaja, Ibercaja Banco, Caixa Ontinyent, Colonya Pollença and Cecabank), explains: “Saving is a fundamental macroeconomic variable since one adequate savings rate It is a trigger for economic growth. By maintaining healthy savings, people can meet goals, plan for retirement and have a more dignified future. “Saving helps individuals perform better.”
Other innovative savings strategies
It may be that currently the distribution of your budget looks less like 50/30/20 and more like 90/10, where almost all income is allocated to necessary expenses and the rest to an occasional whim. However, once you have analyzed your expenses and observed what you need to live, try to dedicate a portion of your income to transforming, even modestly, the percentages and go from 90/10 at least 85/10/5.
The reality is that an important part of the savings you can generate It largely depends on your income.. The 50/30/20 rule and its variants may not fit your budget, but don’t worry, here are other innovative savings techniques that can make it easier to manage your expenses.
- The declining cent challenge: consists of starting to save 3.65 euros on January 1 and each day reducing that daily amount by one cent, until reserving only 1 cent on the last day of the year. At the end of the year you will have saved 667.95 euros.
- The conscious consumption method: consists of leaving a “fallow period” before making a purchase. You see something you want and feel the need to buy it. However, wait. Allow one to three days to pass, and you’ll really see if you still need that product.
- The 52 week challenge: consists of saving each week an amount of money that you will increase weekly by one euro. For example, you start saving one euro, the second week you will save two euros, the third you will save three euros… and so on until week 52. Adding the savings of all the weeks at the end of the year you will have saved almost 1,400 euros, specifically, 1,378 euros.
