“The budget is not a restriction, it is a method to ensure financial freedom. Knowing how much money comes in and what goes out is having control, which allows you to start the habit of saving,” says Maldonado.
Most Guatemalans reach the end of the month wondering where their money went, which is often due to poor planning, for this reason, organizing income and expenses is not an exclusive task for accountants. Everyone can (and should) do it.
The first step, according to the expert, is to calculate the monthly income, after taxes and deductions. If income varies month to month, the recommendation is to take the average of the last six months as a base reference.
Once the income is clear, the next step is to record the expenses and separate them into two categories:
- Fixed expenses: those that are repeated every month with the same amount. Example: rent, mortgage, basic services, insurance, among others.
- Variable expenses: those that change according to the habits of each month, such as going out to restaurants, entertainment, travel, among others.
The expert explains that lost money is usually hidden in variable expenses, referring to them as “ant expenses.” These can be subscriptions that are not used, coffees in the morning, food orders, among others.
It is essential to record each expense for the entire month, whether it is a basic Excel document, Google Sheets, or even a table made with paper and pencil. This is often eye-opening for those doing it for the first time.
The savings
Savings should not be what is left after spending uncontrollably, but rather the first thing you set aside. “If you wait until there is money left over to save it, you will never save it. This should be treated as another fixed expense, which you owe to yourself,” emphasizes Maldonado.
One of the most recommended methods to organize income is the 50/30/20 rule:
- 50% for basic needs, such as rent, electricity and food
- 30% on non-essential but desired expenses, such as the gym or subscriptions
- 20% to savings and payment of debts, in order to meet financial objectives
Although this proportion may vary depending on the reality of each person, the key is that the savings have a guaranteed space, not excess.
Set clear goals
BAC recommends that each person define their goals before designing their plan by asking themselves these questions:
- Do I want to pay a debt?
- Do I need to save to meet a goal?
- Do I want to have an emergency fund?
- Do I need to make a large purchase?
Goals can be short-term (three months to a year), medium-term (one to five years), or long-term (such as retirement). An emergency fund is also considered by Maldonado as the most important priority before any other goal. This should be equivalent to three to six months’ basic expenses, with the purpose of protecting the budget from any unforeseen event such as an illness, an urgent repair or loss of work.
Consistency is key
Creating the budget is just the beginning. According to BAC, it should be reviewed at least once a month, especially when there are changes in income, new fixed expenses, or goals that have already been met and need to be replaced.
“A budget is not written in stone. It is a flexible tool designed to support its owner, not punish him. If one month expenses skyrocket, it is adjusted and followed. The important thing is to be consistent,” commented the expert.
Financial education is not acquired in a single day, but the personal budget is, according to the specialist, the most accessible and effective start. Maldonado concludes that a budget does not require investment or prior experience. The best time to start is today.
Take these financial tips into account to maintain your financial health and remember that BAC has different tools to provide you with positive financial advice in https://finanzaspositives.com/guatemala and the podcast “Hágale Numeros” on Spotify https://www.baccredomatic.com/es-gt/personas/landing/podcast-hagale-numeros