Before you put your money to work for you and even learn how to best invest your savings, all experts recommend have healthy financial habits. The first one is usually savings, followed by maintaining a solid emergency cushion and a long-term plan for your capital.
“It is essential to create healthy financial habits from minute zero, from the moment you receive your first paycheck, your first salary. Why? Because from that moment you have the opportunity to do things well. And the first thing many times is to change the concept of savings,” says Juan Massana , Head of the Madrid-Central and Northeast Regions and Islands in Banco Mediolanum.
An expert who attended the last personal finance event Business Insider Spain, Money Insider: young people and savings, acknowledges that there are many myths and clichés surrounding these customs. Above all, he draws attention, among the youngest.
“They are looking for immediacy, shortcuts and (this is far from a legend) who entered the labor market in very complicated situations and with high youth unemployment,” Massana mentioned. But they exist not so young who have the same financial problems or are approaching retirement age without any retirement plan, the expert acknowledges.
In either of these two scenarios, whether you start early or think you’re late getting your personal finances in order, Massana recommends three financial habits that can be adapted to any pocket or risk profile.
Impose
Everyone thinks they know what savings are. Although virtually no one applies the savings formula well. Massana insists on this concept because it is usually understood as “the amount remaining at the end of the month”, is associated with very short-term goals to buy something specific, or is associated with “just in case”.
“Most people think that savings comes from the ‘income minus expenses’ formula. It should be so “income minus savings equals expenses”. I will spend what I have left. Just as you have an item that goes to the gym payment and the car payment, you need to have one that goes to savings,” explains the director of Banco Mediolanum.
Have short, medium and long term goals
Each person has their own casuistry, personal and professional life. Then you have a range of interests, goals and concerns. Each of them must be reflected in your financial situation.
“Above all, they must analyze with a financial advisor what their goals are in the short, medium and long term. Saving for a vacation is not the same as saving for a capital increase, saving for tomorrow, buying a home or a pension. They are very different periods of time, one thing six months, another two years, and another could be 30 years,” he illustrates.
That’s important give it a name and a photo, because if you skimp to save, an unforeseen event may occur and you stop saving for a certain period of time. But if you’re saving for a master’s degree, for example, you’ll be more aware that you can’t fail with this habit.
Planning for retirement
Among these financial goals, Massana believes it is essential to have a long-term vision in individual financial planning. This strategy needs to be pushed up to the retirement age of the individual. And it tends to be a problem with younger people.
“Young people are aware of economic changes and that they create uncertainty. They see that interest rates are rising and they know that they have to look for alternatives, see what to do with those savings so that they do not lose purchasing power and meet their goals,” he added. ” puts the expert into context.
“But young people don’t have that sensitivity. As they get older, they become more and more aware of what’s coming,” he adds.
Massana believes it If possible, we must insist even more on long-term savingsbecause there is something called compound interest, “which is a big force in creating a big cushion, a great piggy bank of money for the future,” concludes the expert.