I don't know what I did with my money! That way of thinking is the one that is affecting your pocket the most. Here's what you need to take into account so that your income starts to be managed in a more sensible way.
Probably the biggest challenge you will have to deal with in your contact with money is the daily handling of cash, which is not only what we have in cash, but all those amounts that are visible in the bank or in short-term placements.
Usually we all watch the salary slip through our fingers without warning. Have you ever heard the expression 'I don't know what I did with the money!
One of your goals when you start using Personal Financial Planning is to remove that phrase from your lips. You always have to know what you've done with your funds.
Because of the importance of the subject, this article will have two parts. The first, with the first recommendations on the proper use of money, on the subject of day-to-day transactions. And in the next issue of this topic we will deal with the intelligent use of credit.
Let's go back to our first topic, the use we make of day-to-day transactions. The ones we pay the least attention to because they are modest amounts, which we handle with absolute confidence.
As long as income is enough to cover expenses, we don't worry about a few cents less. At this point I want to recall a saying that probably comes from time immemorial: "Take care of pennies, weights take care of themselves.
Whether our income is large or small, it is important to apply this saying at all times. Please don't misunderstand me; I'm not suggesting that you become a miser. Absolutely not! You must continue to be as generous as you always have been, but you must maintain control over your spending.
1. What tactics can be used to efficiently manage money?
Among others, the following practices have been shown to be effective:
Never spend more than you earn. It's simple logic. No matter how high your income is, if you spend more than you earn, you will always be in deficit and you will never be able to have a remnant to save. An important practice is to manage through and adhere to a budget.
If you have debts, pay them as soon as possible. Don't let them build up. If you use your credit card, pay the balance in full. The interest they charge is usually very high.
Set aside a small amount each month. It is advisable to save at least 10% of the tickets. Open a savings account in your bank of confidence and establish an automatic system between your source of monetary supply and your bank, so that every month that amount is transferred to you. This will get you used to not having those funds.
Create an emergency reserve. Before thinking about medium- and long-term placements, you should establish your emergency reserve that covers at least six months of your budget.
Educate yourself about financial investments. Read, take courses, attend seminars, talk to your banker, do whatever it takes, but educate yourself early in life.
Be prepared to make good decisions when you talk to representatives of insurance companies, brokers, banks, or other similar entities. While most of them are ethical and honest people, there are still some financial sharks who won't hesitate for a moment to keep their savings if you're not alert.
Plan your financial goals. Prepare your own plan the same way you prepare your company's plan.
Start your retirement fund as early as possible. Start your contributions to your company's pension plan, or establish an individual investment program exclusively for that destination.
Don't leave your reserves idle; make them produce. The only one who enjoys a large checking account is the bank.
What type of bank account is most convenient?
Banks and other financial institutions, in their eagerness to compete for deposits, offer countless alternatives, both short and long term.
Common current account. As its name indicates, it is the most common of all the possibilities offered by banks. The funds are in sight (available at all times) and do not earn any interest. On the contrary, the customer is obliged to maintain a monthly minimum, below which there will be a charge.
Special current account. Some banks, in order to attract customers, offer this alternative. The difference with the previous one is that they pay a minimum interest on the balances.
Savings account. The banks offer different modalities, which will allow you to have the money at sight and to obtain better interests that with the previous one. Currently, with debit cards and the ease of the Internet, it is much more convenient to manage the daily in one of these accounts than in a current one. You have the same availability and pay better interest. Eventually, when a check needs to be made, it is resolved with an Internet transfer.
3. Where to invest in the short term?
Generally speaking, the short term is used for placements of less than one year. If you have surpluses that you don't need for some time, or that you only need on a certain date, the best options are fixed income instruments such as certificates of deposit or government bonds. These and other financial instruments will be discussed in detail below.
4. What are medium- and long-term investments?
Generally speaking, the medium term is used for placements between one and five years, and the long term for more than five years. To make these types of investments efficiently you will need to go through a process that will help you establish your own ¨política allocation of activos¨. It will tell you which portfolio is optimal. The one that best suits your particular situation. We will also discuss this in detail later.
5. How safe are the savings in the bank?
There is a general belief that banks are as solid as granite. They never go bankrupt. This belief is probably more accurate if we refer to bankers, but not banks. Within the banking sector, as well as within industrial and commercial enterprises, there are different degrees of soundness.
The difference is that, while industrial and commercial entities go bankrupt individually, banks generally go in waves. When a country's banking system collapses, it usually drags in the weakest banks, those that do not have enough financial muscle to stay afloat during times of crisis.
The number one rule of cash management, therefore, is to select a solid bank; even better if it is backed by multinational corporations, those that cannot afford to let one of their subsidiaries or affiliates go bankrupt.
6. How secure are electronic banking services?
New generations probably don't know how wasteful it was to get cash at a bank or, even worse, try to cash a check on a weekend. Fortunately, there was always the shopkeeper on the corner who did us a favor.
Electronic services have made our lives easier. Today, with ATMs, we have the possibility of obtaining cash 24 hours a day, 365 days a year. We have debit cards that allow us to make purchases without having to manipulate cash and we have online services that give us the ability to manage our accounts from the comfort of our home. Very easy... but not risk-free.
One of the fastest growing areas of criminality in the world is electronic fraud. There are thousands of "black hat hackers" trying to access the accounts of unsuspecting savers who, by carelessness or ignorance leave the door open, to strip them of their money.
The most common crime is "phishing", through which you receive an email, supposedly from your bank, asking you to enter the page of the entity and update your information. The place where they take you is an exact copy of the real page of the corresponding entity.
Even if you don't respond to the information requested there, it is possible that, simply by opening it, you may be left with software installed on your computer that can eventually transmit your personal information and passwords to scammers. The solution is to be cautious in your online relationships.
Cloning of cards, parallel accounts, unauthorized transfers... there are many alternatives available to fraudsters. Banks and financial institutions try to do their job to protect you, but fraudsters are always one step ahead. So, my friend, handle your account with caution. Enjoy the benefits of technology, but don't be careless!
7. How do you protect yourself against electronic scams?
As a general rule, never open unknown messages and never send confidential information by email. Periodically review your accounts and report any shortages to your bank immediately.
Internet shopping has become very popular. So have credit card scams. It is important, therefore, to protect yourself.