Money aside! A recipe to keep your money

Awareness campaign in cooperation with the leading financial portal Pení . Read the full article with comments and links at this link.

We’ll share a simple trick to help you control your spending instinct. But first, let’s review some principles of managing family finances.

In today’s installment of our series, we’ll first quickly summarize what we’ve covered so far, and in the second half we’ll add practical advice on how to save effectively. So that it actually works.

First in points of theory:

Start with expenses

Limit spending to the mandatory and necessary minimum. Avoid unnecessary expenses or limit them significantly to truly exceptional occasions.

Follow the budget

And track your expenses exactly. If you have to save, it’s really necessary. And it’s also good for understanding yourself and your habits. While this is a somewhat unpleasant and, for some, perhaps even obnoxious activity, it is a highly useful procedure. All you need is paper and pencil, but it can be done more easily, automatically. Expense tracking is already offered as a standard service in online or mobile banking by almost every bank.

Tell yourself what you want

Define your family goals, family financial and life strategy. It is advisable to formulate your goals together, as a family. Such a goal may be, for example, to save a half-year financial reserve or to pay for a child’s study stay.

Openly and together

Make all decisions as a family, together and in agreement. This is the only way to get everyone motivated to follow the rules. Every independent, unconsulted decision is a violation of some internal rule of family functioning. This rule is mutual openness and joint decision-making on all essential aspects of the family property. Even if one partner just listens to the other’s arguments and just nods at them without further questions or discussion, it’s better than going behind their back.

How to save: this works

And now a little practice. It’s actually a cheap trick to fool yourself – but it gets results. Let’s start with a simple quiz question: How do we save the most money?

a) I will set aside before payday what is left after paying the necessary expenses,
b) when I get paid, I put aside the same amount each time,
c) saving is not worth it, money loses its value.

For example, let’s start from the end, option c. There is something to it, money does lose value over time due to inflation. This year in particular, they are losing money at a much faster rate than we are used to, with inflation several times higher than in previous years. But there were times when it was even higher.

But is that really a reason not to save? Perhaps. If you have enough in reserve, it’s probably a good idea to think about whether to exchange the money for something that doesn’t lose value as quickly, whether it’s education, stocks, real estate or experiences. But we will get to defending against inflation in time. Because first you have to have that reserve for the unexpected. For not being able to work for six months, for a new car if the one you drive to work breaks down, for a washing machine…

So unless you are already pretty much assured, c is not the right answer.

Let’s look at option a. The day before payday, I’ll put aside what’s left. But do you really have any money left? Unfortunately, human nature implies that such a situation does not often arise. A person usually spends the money at his disposal.

What the eyes can’t see

Then we are left with b as the correct answer. But is it really? What does it mean to keep putting aside the same amount? According to a survey conducted by ING Bank a few years ago, setting aside a fixed amount is the most effective way to save. I get my salary and immediately put aside some money that I determine in advance, for example 300 crowns. As soon as the money is credited to my account, I immediately send the three hundred elsewhere – preferably to a savings account or another account I don’t normally touch. The amount to be set aside will be determined by each person according to his or her own means.

Let’s take a closer look at this survey. For example, we learn here that people mostly save amounts up to CZK 500 per month. It also turns out that impulse purchases are the biggest money guzzlers. That is, when I go to a store, I like something, it’s not on my shopping list, and I buy it anyway. There is a whole discipline of advertising that targets people and their impulse purchases – the goal is to get people to buy something they don’t necessarily need.

So remember – only go to the store with a shopping list.

And the first step after payday – immediately put aside money for savings.

Author: Jan Müller, image credit:


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