Get your finances in shape
The solution to finding a balance between expenses, savings, and investments is to adopt healthy financial habits that lay the groundwork for future financial well-being. According to T. Rowe Price, here are 6 small steps that will make it easier to manage money today for long-term benefits:
- Start by building a budget: It is crucial to ensure that savings and expenses align with your priorities. This can be done with a simple pen and paper or tailor-made programs and applications. Consider all possible monthly expenses, from fixed to variable costs, without forgetting unexpected expenses. A budget should also include a savings goal and a plan to reduce debts to be effective.
- Set aside money for emergencies: Life sometimes surprises us with unexpected events. Instead of using the monthly budget or savings, it's useful to set aside a fund specifically for these situations. According to T. Rowe Price's annual "Retirement savings and spending" survey, 49% of the 401,000 respondents reported starting an emergency fund in the last 12 months. It's advisable to set aside an incremental amount to cover expenses for approximately six months.
- Make savings deposits automatic: Automation processes save time and require no additional effort. Once initiated, all you need to do is keep an eye on the progress. Strictly adhering to the plan provides short-term balance despite market volatility, allowing you to buy more when prices are low and less when they are high. Furthermore, there will be no temptation to spend that money in another way.
- Increase retirement savings: When it comes to retirement, the goals are to start as early as possible and save as much as possible. A good idea is to gradually increase the percentage contributed to the supplementary pension each year.
- Take advantage of financial education opportunities: Understanding and structuring financial choices in complete economy is not easy but increasingly necessary to make informed decisions for your needs.
- Increase earning potential: Salary is a fundamental part of financial income, so consider income when developing an action plan. Increasing earning potential can help (e.g., pursuing additional education or a second job, although it's not easy).
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