2023-08-06 08:31:34
Managing money requires discipline and responsibility. To these two qualities must be added some knowledge, which according to Esteban Correa, commercial assistant manager of the Andalucía savings cooperative, is essential to understand personal finances without being an expert.
Knowing these concepts will help to have better control of expenses and will avoid common mistakes such as waste or over-indebtedness.
“Undoubtedly, knowledge of personal finances contributes to people’s financial growth, since they help to forge good economic habits and will allow them to make sound financial decisions. In addition, proper money management will make it easier for us to achieve our proposed goals”, explains Correa.
Here are some of the basic concepts and terms of healthy finance:
Budget: consists of recording the money that is available and allocating items for anticipated expenses. It refers to income and expenses and helps to have better control of money, by anticipating the amount that is needed to meet any type of financial responsibility and to limit or cut unnecessary expenses.Personal purchasing power: It is the amount of money with which account a person to satisfy the acquisition of goods or services, as well as to cover all their expenses such as basic services, debts, etc. It is always important to be clear about purchasing power before acquiring new financial obligations that run the risk of not being covered with inadequate money management. Liquidity: It is the capacity of cash that is available to meet obligations or responsibilities financial. Assets: These are the assets that a person has and that have a long useful life. For example, a house, household items, land, vehicles, among others. Liabilities: Correspond to debts to third parties, either with financial institutions, relatives, friends, etc. “An example of liabilities is the loan, when acquiring it we are obliged to pay the principal amount, together with the interest to the supplier”, explains the executive from Andalusia. Current payment: It is the cancellation of the total amount of a debt assumed through a credit card, that is, it must be covered with a single payment in the next account statement generated on the card. Deferred payment: It consists of dividing the total amount of a purchase, made through direct credit or credit card, into several installments, either 3, 6, 12 months, with or without interest. “Here we recommend caution, offers such as buy today and pay after two or three months, will only cause us to accumulate expenses and attract more debt to our daily economy”, details the Andalusian official. Grace period: It is a period of time that is agreed with an entity, before starting the payment of a credit, where no installment must be paid, but although it sounds like an attractive alternative, it must be taken into account that it can generate interest that must still be paid in the following installments credit. Interest rate: Equivalent to a certain value that must be canceled when accessing an amount of money through credit and in a period of time. Credit history: It is the record of payment behavior before financial institutions, where the information on credits made, outstanding balances and punctuality in payment is detailed. This registry is used by banks or cooperatives for the analysis of the granting of credits or financial products.
To these economic terms we must add the habit of saving that must be a constant that is included in the budget. Get in the habit of saving something each month, even if it may not always be the 10% that financial experts advise. (YO)
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