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On many occasions we have mentioned how important it is to know how to properly manage our money, and protect the fruit of our work against unforeseen events. For this reason, below we give a list of 20 things we can do now to take care of our Personal Finances and so that we can meet all our objectives within the deadline that we have set for ourselves.
20 Tips To Take Care Of Your Money
1. Get the value of your estate
Make a personal balance, calculating the amount of your assets and your liabilities, to obtain the total value of your assets. Perform this exercise monthly so that if you follow these tips, you can see how it increases each month.
2. Pay off your debts and start saving
Carry out a careful analysis of your financial situation, your income and your expenses. See where your money is going, and how you can save. Don’t spend the raises or bonuses you receive; use them to pay a part of your debts and, when you have paid them off, use them to save for the fulfillment of your objectives. This is one way to save your money.
3. Create your emergency fund
It is very important to always have money available, equivalent to between three and six months of your current expenses, invested in a safe, accessible, liquid account that generates interest above inflation. Use this money only for emergencies and unforeseen events, so you don’t have to use the money you have saved for other purposes.
4. Invest more now
The more and sooner you invest, the more profit you will make, thanks to the magic of compound interest .
5. Be systematic
Deposit your salary directly into your checking account, and use the electronic advantages offered by some banks to automatically transfer a certain amount each month to your investment account. Take advantage of the Personal Finance business programs to keep a daily record of all your movements, and always have the most relevant data at hand.
6. Educate yourself
Read articles, books and magazines on Personal Finance, which will give you new ideas about how to be a better saver, how to shop smarter, how to take care of your money and how to be a better investor. Attend all the seminars and talks you can. Although you may have your own investment advisor, you should always know and understand the basics of investing.
7. Hire an expert
If you don’t have a financial advisor, and you think you need one to guide you, find and hire someone who knows how to earn your trust. The ideal advisor must listen to all your wishes, concerns and goals, and design an investment plan for you to guide you on the right path to achieve them. It should help you take care of your money.
8. Diversify your investments
Diversifying means not putting all your eggs in one basket – this is critical to saving money. Invest in different instruments, a little in debt instruments, a little in currency hedging instruments and a little more in equities, but always taking care of your liquidity needs, your performance expectations and your risk profile.
9. Check your credit report
In Mexico, any natural person can have access to their report from the Credit Bureau for free. Knowing you and being aware of your credit situation is the first step to improving it.
10. Check your credit cards
Use them only as a means of payment to take advantage of the free financing they offer, and pay them in full before their deadline. Never use them as a means of credit, unless it is a true emergency. Have only the ones you need to meet your needs.
11. Estimate your pension
Make a projection to see how much you will have in your Afore when you retire, assuming your salary will remain constant. See how much you have already accumulated and how much you are contributing to the two-month period. Use a real yield of 5-6% and consider the commissions on balance or performance that your Afore applies. Do this exercise every time your salary changes.
12. Calculate how much you will need for your retirement
If you see that you will not be enough with what you will have in your Afore, supplement your savings with voluntary contributions , with endowment life insurance or with a separate retirement plan .
13. Know the benefits that your Social Security system gives you
Social Security systems in Mexico offer many benefits. The most important are, without a doubt, health and maternity insurance, disability payments and the right to a pension in the event of total and permanent disability. Find out how many weeks you must contribute to obtain each of the benefits offered by current legislation and try to take advantage of all its benefits.
14. Check your insurance coverage
This is another way to take care of your money. Make sure you have your home, health, life, car, and liability properly insured. If you own a home, get replacement value coverage; if you rent, insure your personal property.
15. Plan your succession
Make a will or contract a testamentary trust, in order to guarantee that the fruits of your work are in the right hands, and avoid that your loved ones have to carry out long and costly procedures, or have to face painful lawsuits and arguments between them. This is taking care of your money for when you are gone.
16. Keep your beneficiaries updated
Many times our beneficiary designation corresponds to immediate needs, which are subject to change over time. It is a good practice to verify, once a year, who are the beneficiaries of all your accounts or insurance policies, and to make the pertinent modifications if they are required.
17. Keep all your financial records in a safe place
Store all your contracts in a fire box; a good option may be a safe in a bank. Also, always keep a copy of them handy for any clarification you need to make. If you have a computer, you can keep all your data in one file, keeping a backup of the information in a safe place. Make sure your spouse or someone you trust knows where to find this information in case of an emergency.
18. Prepare yourself
Nobody likes to think that one day we can get divorced, incapacitated or just die. But it can happen to us, so we must always be prepared.
19. Use your head, not your heart
Do your own research and don’t base your financial decisions on feelings or advice from your friends. Also, never invest in something you don’t understand and always ask. If you are not satisfied with the responses you receive, or if the person you are dealing with makes you uncomfortable, take your money out immediately and invest it elsewhere.
20. Don’t shy away from your responsibility
Even though your partner manages the family finances , you should always know what is going on with your money. Sit down with your partner once a month to review your financial statements and reports. Review your investments with her. Even if you have professionals working for you – accountants, analysts, financial advisors or account executives – you should always know what is going on with your money. Remember, no one will be more concerned with your financial security than you.
Do you have any other tips for taking care of your money that are practical?