Are you looking to improve your personal finances, but don’t know what to do? Before planning any expenditure, you should first make a budget.
To do this, you must divide on the one hand all your income and subtract the fixed expenses (those that do not change from month to month, such as rent or loan payments) and the variable expenses (those that can go up or down depending on your consumption, such as food or some services).
In this way you will know how much money you have each month, how much you spend and if you have a surplus that you could save or invest to achieve your goals.
With this you can also define which expenses are more important and if you can reduce some of them to reach them earlier than planned.
When you are clear about how much money you have, it is time to define the objectives you want to achieve. To do this, priorities must be determined:
Once you have all your basic needs covered, the first purpose to which you should direct your efforts is to pay your debts, especially those that generate very high interest. With this, the money that you stop investing in the payment of interest can be used for other things.
Second, consider setting up an investment fund that can be used to save for the future, whether it’s for retirement or to deal with an emergency. You can be feeding this fund from time to time, and the idea is that it generates interest so that it grows over time.
Then achieve the goals in the short term , that is, going on vacation, paying for a family party or expenses for the return to school.
Last come the long-term goals: do you want to remodel your house or buy a new car? If you already have other debts covered, it is easier for you to access a credit or loan for these types of issues.
Now, many times you know what you want to achieve, but not how to do it, so time begins to pass and to cover some expenses you incur unnecessary debts.
That is why a strategy is to define objectives SMART, ie specific ( S pecific), measurable ( M easurable), achievable ( A chievable), relevant ( R Elevant) and in a defined time ( T ime-Oriented).
How can you apply them? Let’s do a practical exercise to achieve the goal of going on vacation.
The first point tells us that it must be specific, so the plan will be to go on vacation to the beach for a week, for this a certain amount of money is required to cover the transfer, accommodation and meals, let’s say it is 10,000 pesos .
By defining the amount we cover the second point, and the third allows us to be realistic: Can I spend on going on vacation? Will I be able to cover that amount or should I find another destination?
Fourth point, is it relevant? Going on vacation is not a necessity, but it is a reward for work and effort, so taking time off can be very relevant.
While in the last one it is necessary to define in what time I must reach my objective, suppose it is in three months.
Now we have a plan, you can also have several of them at the same time and move forward little by little. The important thing is not to lose motivation and discipline to keep saving.
If you are looking to meet your most immediate goals, come to our Master Credit experts, who will be able to provide you with the best options.