Managing your couple’s money and savings responsibly is a challenge faced by millions of households around the world. A car breakdown, spills from the neighborhood community or the increase in mortgages can be a headache if money is not managed efficiently. It has nothing to do with earning a higher or lower salary, but rather taking into account how much you earn and knowing how to distribute it.
One of the most common practices is to enter the two salaries or benefits that are being collected by the employees. family unit members on the same account. Elizabeth Wakefield, who is an advisor and expert in finance, mortgages and investments, has spoken about this aspect in the podcast ‘It makes sense’.
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“Having all the money in a checking account is one of the main mistakes that many people make,” he explained and the reason is that the money intended for daily expenses should not be mixed with the money that goes to the savings fund. This makes managing your personal finances much more complicated and you could spend money that, in principle, was intended for possible unforeseen events.
It is best to organize money in several accounts
Wakefield advises listeners to always separate money based on purpose. First, in an account for the usual expenses of the month. These are fixed and would include the mortgage, electricity, water or community bills, supermarket purchases and transportation.
In addition, it is good to have another specific account for savings, where what is left once the fixed expenses have been incurred, accumulates so that there is a reserve fund. The next step is to open another account for accruals. This system is used for expenses that are going to be incurred yes or yes, but in the future.
This would include vacations, car or home insurance, for example, or any disbursement of significant amounts. The advisor gave an example, “I want to go on vacation and I plan to spend 2,500 euros in total. This means that I must distribute it in small monthly amounts, saving 100,200 or whatever.”
The best way to do this is “with automatic transfers.” Saving is a kind of piggy bank that avoids the scare derived from poor planning. When the person goes to pay for the trip, they already have reservations.
Review expenses and avoid impulsive purchases
The tax advisor insists on the importance of reviewing expenses periodically, “we have not completed an audit of our expenses,” she points out, in reference to payments that are often made without paying attention, such as subscriptions, fees or services that are no longer used.”
He also recommends thinking before making a purchase. The key, as he explains, is to ask yourself if this expense is acceptable, if it breaks the monthly budget and, if you resort to financing, analyze what the real cost of that operation will be.
Wakefield stresses the importance of looking at the APR versus the TIN. “The APR is the equivalent annual rate, which is how much that money, that financing, costs me, assuming all the extra costs,” he explains. That is, it allows us to know in a more complete way the real price of borrowing money.
For this reason, there are several fundamental aspects that are organizing money, automating savings and reviewing expenses can make a big difference in the financial stability of any home. It’s not just about saving more, but about knowing where each euro is and what it is going to be used for.