In Spain, financial education is still a pending issue. Over the past few years, we have witnessed numerous events that have reminded us of the importance of learn to manage our money more effectively.
From financial scandals such as preferential shares, IRPH and abusive clauses, to the lack of knowledge about basic financial productswe have faced difficulties that have affected our economy in both the short and long term.
Experts point out that many adults in Spain do not know how to manage their money correctly nor do they understand the products they contract. Although it is not such a complicated task, this lack of knowledge causes difficulties in personal finances.
In addition, if adults do not have sufficient knowledge to manage their finances, it will be difficult for them to transmit these skills to their children, thus perpetuating the cycle of lack of financial education.
In Spain, financial education is still a pending issue.
How to manage money?
Keep track of expenses: Regularly recording how much money we spend and how it helps us to better understand our domestic economy. By analyzing expenses, we can identify items where we spend too much money, identify expendable expenses and develop budgets and strategies to save more. tools as one free mobile app They can make it easier to track expenses on the spot.
Don’t spend more than you earn: Preparing a budget allows us to keep our expenses under control and avoid indebtedness. It is essential to reserve credit for specific situations and not recurringly depend on loans or credit cards to cover daily expenses.
Avoid over-indebtedness: There is a golden rule that we must remember: not allocate more than 35% of our income to pay our debts, which include mortgages, cards and loans. Although at present it can be difficult to maintain this ratio due to the high cost of housing, it is essential to aim not to exceed this percentage. If instead of a mortgage we pay rent, the figure should be reduced to 15% or 20%. In this way, we ensure that we can meet our obligations and have some room for maneuver in the event of unforeseen events.
Set savings goals: Reserving an amount of money each month, no matter how small, will help us build a financial cushion that allows us to face unforeseen events or achieve goals, such as buying a car. The 50/20/30 rule is a useful guide: allocate 50% of income to basic expenses (rent, supplies, food), 30% to expendable expenses and allocate the remaining 20% to savings.
Save at the beginning of the month: Saving at the beginning of the month instead of waiting until the end increases the probability of being consistent and reaching our goals. Separating the money destined for savings from the rest helps us not to spend it and to have a better awareness of how much money we have available to cover the expenses of the month. To facilitate this process, an automatic transfer can be scheduled to a savings account at the beginning of each month.
think ahead: When managing our personal finances, we should not focus only on making ends meet, but also on setting long-term goals. save for retirement is a clear example. Starting as soon as possible will allow us to accumulate more money thanks to compound interest. The sooner we start saving, the less effort we will require to reach the same final balance, since we will not only obtain a return on our money, but also on the interest generated.
Take advantage of our bank’s mobile application: Although many clients do not know it, the mobile applications of the banks can be useful tools. Many of them incorporate functionalities such as expense categorizers, which allow us to visualize what we have spent our money on each month, as well as forecasts and graphs. In addition, notifications can be activated to be up to date with the receipts collected. Some banks also offer savings features, such as rounding up purchases and saving the difference, or setting up automatic transfers to a savings account.
Know the risks: One of the biggest mistakes we can make when managing our money is to contract financial products that we do not understand and whose risks we are unaware of. This applies to both financing products and investment products. No.or we must sign any contract that we do not fully understand. In any case, basic financial products are relatively easy to understand. Although it can be intimidating to face the fine print of a contract, it will be enough to know some basic concepts (commission, interest, APR, term, amount, among others) to be able to operate in an informed manner.
Regularly review our account statement: Reviewing the statement of the account once or twice a month allows us to know the state of our finances, the bills we have paid and detect any charges we do not recognizefraud or incorrect commissions.
Compare before hiring: If we want to be intelligent consumers, pay less and get better conditions, it is essential to compare before contracting any service or product. Whether it is the telephone rate, the cost of electricity, bank commissions, the interest on a loan or the profitability of a deposit.
