El valor del Ahorro en tiempos de pandemia de coronavirus
Days ago, we celebrated World Savings Day. Everyone talks about saving, but few do… Many know the benefits and yet they are won by the instant satisfaction of certain “needs”. In this article we will highlight the benefits of planned saving on World Savings Day. We will start with a phrase by Cesare Cantù, an Italian writer.
“Always spend one less coin than you earn”
These wise words speak to the basic essence of saving. Without a doubt, you have to start with something. However, in modern times we all know the phenomenon of inflation, and so today we will talk about the right ways to save.
Without more to add let’s start
Table of Contents.
This is the phrase that many people repeat every day. Certainly, there are people who live on the edge without spending more than necessary. But there are too many people who have great opportunities to save waste them. That is why today we will give you some indications of how we can start saving.
Our first step should be the phrase we mentioned in our introduction, “Always spend one less coin than you earn.” This phrase encompasses the key to saving, simply saving is not a process of saving massively. Saving is a slow process that requires perseverance.
Sometimes we think we have nowhere to save. “How am I going to save if at the end of the month I have no money left?” we sometimes tell ourselves. Other times we have even gone into debt and how will I save if I have debts. Debt is a cost every month. In principle, the first way to save can be to pay our debts. However, this is not always true as we will see later.
To save we must consider two fundamental factors: the cost of our debts and inflation. Without considering these two factors we can equally save, but our strategies will have to vary. If we have no money left at the end of the month, the first step is to make an expense budget. For that we will proceed to talk about how to make a good budget of expenses.
Most of the time we don’t know where our salary is going. We tend to quantify very well the fixed and large expenses such as electricity, water, food, or mortgage. But we miss the minor expenses of every day or the so-called “ant expenses“.
These are expenses that because they are small are always ignored but that generally occur more frequently than we would like to recognize. It is its high frequency that makes these expenses become a greater weight than we really think.
That is why in our budget we must emphasize ant expenses to be able to quantify and control them.
Undoubtedly, one of the keys to making a good budget is to quantify ant expenses. In ordinary people this expense can reach between 10% to 30% of the budget.
We can all have recurring habits, but those that cost us money can be the key to our savings.
Examples of this are cigars for smokers, the cup (or cups) of coffee that we drink in the company’s cafeteria, meals on the street, beers in the pours and Saturdays, etc.
These expenses must be quantified meticulously and multiplied by the number of times we make them in a month.
There are products that have an extra cost for their supposed quality. Brands charge us for advertising their products. Sometimes the price difference is justified, but in others there are much cheaper products that can yield the same results.
It is important that we try new alternatives or seek advice with our friends. It is not about being stingy, but by decreasing the cost of a product we can save that difference and use it for other expenses or in our savings.
Quality and cost do not always go hand in hand, and we must take that into account.
This is one of the most common ant expenses. This is presented because we do not plan our monthly purchase correctly. Something was missing or we ran out of time. That leads us to buy in a place close to home, but more expensive than usual.
If this habit is repeated weekly, we can be sure that there we have an opportunity to save. If we plan our purchases correctly, we can save.
Many times, a craving is just that. But when it happens every day, we have two options: abandon it or buy in quantities. This applies to weekend beers, sweets, cigarettes, or any other habit we have.
Sometimes resorting to the corner warehouse is a psychological strategy to “not formalize” this expense. In this way we deceive ourselves, but that deception costs us high, both psychologically and economically speaking.
If we buy in quantities, we can get discounts that allow us to save the difference. If we abandon them we can save their totality. What do you choose?
The short answer is yes. A budget can help us save because it starts by showing us how much and how much we spend our money. This can raise important alerts about our hidden behaviors.
We can become aware of how much money we spend on cups of coffee, cigars, alcohol or treats. We can also realize how much money we spend extra for not planning our purchases well. This adds up little by little until it becomes a bottomless hole. Therefore, realizing what we do unconsciously can help us organize our finances.
The extra money we get with our finances can become our savings or our way of paying our debts. If anything, we are gaining something. Saving or paying off our debts should also be a conscious decision. In the next installment we can see a series of tips to make the best possible decision.
Saving is not something that happens simply, it is a conscious decision… Let’s become aware and save to have a calmer and happier life. Let’s follow the advice of Gustavo Mirabal, your trusted financial advisor.
If we have large debts, we can usually choose between paying debts and saving. Is it really a dilemma? It may not be a dilemma if we think about it, but we will analyze it in detail.
The first thing we must consider is the “cost” of our debt vs the loss of value of our savings. Assuming that we are in a stable economy, the loss of value is somewhat limited.
We must look for savings instruments that allow us to preserve value. We can consider national currencies if inflation is below 5% per year. Otherwise, we must look for some type of asset that preserves or increases its value, but we will see this later.
On the other hand, the “cost of debt” is key to choosing between paying off debt or saving. More than a dilemma, it is something that should incline our behavior in the predominance of one of these two options. But saving and having savings is something that we must always take into account as we will see below.
We must always save money; this should be clear. But the greater weight between debt payment and savings will be carried by the part that has the highest cost for us.
Why save if we have debt? Because debts are stable, have payments and are pre-stipulated. If we can save money while paying our debts, we will be prepared for the unforeseen.
Savings can help us with unforeseen events and to acquire goods at a lower cost. What we must consider is the level of urgency for the acquisition of the good, the term of payments through savings or credit and access to the good. As long as the savings curve to acquire the good is not excessively long, we should focus on this option.
How can we determine if a good is worth accessing through credits or savings? Next, we will give you some tips.
To acquire goods through savings we must accumulate the value of good. This implies that there are goods of great value that will cost us a lot to obtain them exclusively through savings. This is the case of housing or the car.
On the other hand, smaller goods such as clothes, a television or a refrigerator can be purchased through savings. How to know which alternative to take. Here are some tips.
First, we must consider the cost of borrowing or the interest on credit. In general, loans for large goods have lower interest. This allows you to acquire the good and enjoy it while paying. In addition, because they are goods of great value and generally large, the risk of default is lower. This means that in case of default the banks can recover the property. This reduces the interest on the debt and with it its cost. In some countries these credits are subsidized or controlled. That is why to acquire a home we recommend using low interest credits.
Short repayment terms along with high interest make a good difficult to repay despite credit. In many cases we can pay more interest than the good itself would cost. If an interest is high, it is unfeasible no matter the term. If the interest is low, but the term is very short, it can also become unpayable. A suitable combination of low interest and terms that suit our ability to pay are ideal.
This is an answer we must know. Unless it is an essential good, many times we can postpone the purchase of a good. With this we can save interest and that money can stay in our savings.
If we do not buy a good and that money, we put it to earn interest. this would make money instead of losing value increase it. In this way we would have a double profit, the interest earned on our money saved and the savings generated in interest.
Is what I’m really going to buy a need or a desire? If it’s a wish, can I postpone it or just not buy it? Defining this can help us establish whether or not we should buy the good in question. If we can simply not buy it will help us improve our financial situation.
There are products, services or goods that can represent savings for people. For example, I really like going to the movies and I spend a lot going to this one, buying a good TV could reduce the going to the cinema. This balance sheet can have an impact on better finances.
But we must be honest with ourselves. If the purchase of the good is not going to change our consumption patterns, we should not include it in this category and therefore its purchase would be contraindicated, at least for this reason.
Saving allows us to acquire goods at a lower price. This represents long-term savings. And the money we stop spending on debt interest can become part of our savings.
On the other hand, saving is a source of tranquility because it allows us to face unforeseen events. Thanks to this we will be able to make emergency repairs or face diseases. Without a doubt, saving brings great benefits and that is why on World Savings Day we invite you to discover the right way to save.
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