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5 Steps to Save Successfully

Steps to Save Successfully

The world is full of potential savers who cannot make ends meet with ease. With this guide, we hope that it will be much easier for you to start taking the first steps to save.

The fault that saving is a stranger is the poor financial education with which many have reached adulthood and that has led to perennial apathy.

For generations, social dynamics and the class hierarchy have eroded the aspirations of the ordinary citizen and condemned him to live on an unambitious economic threshold.

Unfortunately, for many, money is a constant reminder of their own limitations, when in reality it should be a tool of liberation . As a result of this confusion, there are those who have developed a tense and distant relationship with their own finances, managing them from misinformation and even from fear.

This guide summarizes the keys to saving in 5 steps. Some people will be able to do the first steps quickly. But it is critical for a good savings plan that we have the calculations well done to be able to have constant and comfortable savings.

A solid savings plan will help us end financial clutter and frustrations thanks to good financial planning based on these 5 key pillars for saving. The goal is to create a strategy that allows us to take control of our finances and finally start saving successfully.

The 5 steps to saving are as follows. Below we will analyze each one in detail:

1. Analyze your finances
Every savings plan begins with an in-depth analysis of the real state of personal finances.

In this first point we must study in depth 3 aspects: Income, expenses and debts (if any). The deeper the analysis, the more faithful the portrait of our situation will be and the better we will be able to prioritize and discriminate expenses.

This step is laborious and takes some time, but don't panic. Once you have it, you will have covered the most important part of the way.

When it comes to addressing the status of your income, expenses and possible debts, we propose the following questions as a guideline for doing the exercise:

1.1 Income
Write down the answer to the following questions to know as accurately as possible what your income is:

What is my income?
How often do I receive them? Is there an exact date or is it variable?
Will I receive any extras soon?
They owe me money? How much and when will it arrive?
In addition, not only the amount of income is important but its stability. Is there a risk of job loss or payroll reduction? Anticipating this setback is essential.

1.2. Expenses
This block is the most complex to measure because the amount of expenses as well as the frequency and type must be taken into account. In this case we would ask ourselves the questions:

How much have I spent in total this month?
In what?
How much money has each expense taken?
As we address these questions, we will categorize expenses according to whether they are:

Fixed expenses : Those that we must face obligatorily every month and in a stable way over time. They are the basics that we cannot do without. In this bag would enter the rent or mortgage, bills, food, etc.

Extra fixed expenses : In this subcategory we would include regular expenses that are not essential, but that are part of our day to day. Some examples are: gasoline, car insurance, subscriptions to streaming platforms , Internet, gym fees, courses and classes, etc.

Variable expenses : These expenses would include material whims and everything related to leisure: restaurants, movie tickets, hobbies , etc.

Ant expenses : they are not usually given importance because they are indirect and sporadic expenses, but in the long term they take a lot of repercussion. We will identify them as those small expenses that go unnoticed but that are constant and that normally derive from bad consumption habits. Example: Do you usually throw a lot of food? If so, begin to remedy it.

Unforeseen : Have any emerged recently? Do you envision another that may occur in the near future? Sometimes we believe that they are unforeseen what really are distractions and lack of anticipation. If your mobile has failed you lately, jump into this problem and you will be able to face it more calmly on the day you have to repair it or pay for a new one.

1.3. Debts
What debts do I have?
What is the magnitude?
And the level of urgency?
Is there one that is about to be liquidated?
Saving and borrowing were never good friends, so it is essential that you be honest with yourself and put all outstanding debts on the table. Forgetting them or turning a deaf ear will only make the problem worse and prevent you from saving once and for all. Face them. Of course, remember that debt is not bad, what is bad is excess debt.

Once you have identified and organized your expenses well, it is time to clean up and question your habits and consumption patterns. It is not about punishing yourself but about identifying what you have been doing wrong all this time.

2. Prioritize expenses
Surprised with the analysis of your finances? Stepping back and taking a general portrait of your finances is the most effective way to identify weaknesses.

In the second step to save, take the map of expenses and begin to discriminate between those that are real and those that are superfluous. This exercise requires a calm and rational screening, since future savings will depend on it. Here is an example:

Priority expenses : This is where fixed expenses, fixed extras and debts come in. Although the first two are real and necessary, do not resign yourself to overpaying for them. Compare offers to save on utility bills and see if your current rent is worth it. You will still have fixed expenses, but they will better fit your needs. As for the extras, check if you are taking advantage of your annual Spotify subscription or if you can replace the car with a cheaper and more ecological alternative. We insist: it is not only a question of eliminating unnecessary expenses, but of readjusting the priority ones.

When it comes to debts, they should always be preferred. The important thing is to face them to get clean as soon as possible. Take advantage of payments and injections of extra money to pay off your debts soon.

Superfluous expenses : Eliminate the ant expenses that anchor you to bad habits and that contribute to waste. Regarding variable expenses, try to have leisure well controlled by managing your outings so that they fit into a closed budget. This point is the one that requires the most willpower and the most difficult to fulfill, but remember that variable expenses have no limits unless you put them on yourself.

Savings : It is not an expense, but from now on we will value it as such. If we want to save consciously, we must consider saving as a priority and go to meet it. It is advisable to have it as a fixed expense at the beginning of each month, so we will ensure that the financial cushion is growing.

3. Make a budget and control it
Once we have the financial analysis and the selection of important expenses, now it is the most important step: Make a budget and carry it out.

First of all, it is important to know the difference between saving and investing . Basically, when we save we are saving money to use in the future. On the other hand, when we invest we also seek to obtain a return on that money that we have saved, that is, the investment is a step beyond saving. We save first and then we can decide if we want to invest it and thus obtain returns from our savings.

In this guide we are going to focus mainly on the saving part, since to start any path it is important to start with the first step.

There are many ways to start saving. To do this, first of all we will have to know how much of our income we can allocate to savings. One of the best known expenses is the 50-30-20 law, but there are more ways to do it, since its effectiveness depends on the volume of income. Taking into account this model, we will dedicate 50% of the salary to fixed expenses and fixed extras, 30% to variable expenses and 20% to savings.

A good trick to save is to separate the account where we have the money saved, from our account where we have the expenses, because this way, in addition to avoiding temptations, we will see how the money in the savings account increases just by the amount that we have established.

To achieve constant savings, one of the best ways is to schedule a periodic transfer from our account where we receive the income to our account where we have the savings. Through this automatic transfer we can establish that 20% of our income (or the percentage that can be saved) goes directly to our savings account. Thus we will not be able to use that money and we will not have it for our expenses, avoiding temptations and thus helping us to have an iron discipline of saving.

To apply and update this guideline, you will need to use control tools:

Savings account: It is very important to have an account where we can separate the money that we are going to save from the money that we use for our expenses. In this savings account we can keep the money in cash, have a term deposit , or even go further and invest it. If we want to obtain more performance from our savings we can invest it, either in stocks, bonds or investment funds, among other alternatives.

Savings app: Automating is the most comfortable and effective way to keep the economy at bay. Therefore, there are applications that facilitate this task. One that we recommend from Economipedia is Goin, a savings app that allows you to make periodic transfers from your bank account to your Goin piggy bank. In addition, you also have the option of withholding a percentage of your payroll just when it is collected. Not having this money available in the bank keeps you away from temptations and helps you plan better. You just have to indicate the dates and the quantities you want. You can have the money back in your account whenever you want.

Bank Alerts: Technology has its pros and cons, but banking applications have improved in this regard. Some of them allow you to generate alerts so that you are aware of when you have exceeded a certain spending threshold.

Envelopes: This option is the oldest. We can withdraw the money from our account and store it in cash envelopes. On the other hand, for many people it will be difficult to have the savings envelope close and not be able to touch it. It is also somewhat uncomfortable and dangerous to carry all the cash.

Excel : It is the new paper and pencil to keep the accounts up to date. Although it is important to keep it simple. In fact, it is only recommended if you are an extremely organized and constant person, otherwise this system will be discouraging and you will end up leaving it aside. For this reason, automatic tools that do this work for us are more recommended. If, on the other hand, you are a very organized and constant person, it can be a very useful tool to keep accounts up to date.

4. Start saving
Once you have taken the first three steps to save, it is time to jump into the ring. From now on, firmness and perseverance are essential, so it is important that you stay motivated by remembering your savings goals. They should be achievable and positive goals where possible, or else the process will become exhausting.

Especially if you are just starting out, it is essential that you automate savings and take tools that turn this process into a comfortable, accessible and positive experience. All motivation is little to achieve your goal at the end of the month.

Our most important tip? The best time to start saving is now!

5. Review the process and the first four steps to save
After a while, check to see if it worked as you expected or if it didn't meet your expectations. Whatever the result, spend a little time at the end of the month to measure and control the financial decisions you made at the beginning (1. Analyze your finances) and make the necessary adjustments. You will need to modify the savings plan until you find the right key.

It is also important to take into account the different times of the year, if it coincides with the Christmas holidays or summer holidays, or if you are going to embark on a personal stage that demands extra savings such as a wedding, a special gift to someone, the buying a flat, a car, etc. The personal financial situation is changing, that is why you must keep the savings plan always updated.

In the end, remember that you are the owner of your economy and that money works for you and not the other way around. When you have carried out these 5 steps to save, you will be fully capable of comfortably tackling the scenarios and situations that arise. Now it's your turn.

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