The best thing you can do for your business finances is to govern your personal money. This tips guide will help you manage your budget efficiently and effectively.
It is very difficult to take care of your finances and those of your business if you do not plan. But don't worry: it's always time to start outlining a plan that allows you to save what is needed in the coming months and spend wisely .
Remember that it is always possible to avoid the wrong decisions. These smart consumer financial recommendations, an entity linked to MasterCard Worldwide, can help you face turbulent times.
1. Set specific goals
Saving is easier when you have clear goals .
- Buy a house
- Send your children to college
- Travel around the world
For your plan to be sound, it is essential that the goals have a set time and cost . Once you have them clear, you need to sort them by priority.
Whatever your goal, be specific. Calculate how many weeks or months there is between the present and the date you want to reach your goal. Divide the estimated cost by the number of weeks or months. That is the amount you need to save each week or every month to have enough money saved.
Remember: a goal is a dream that has been set a deadline.
2. If you don't see it, you won't miss it
Save and invest a percentage (from 5% to 10%) of your annual gross income. This may be more difficult than it seems. Design a solid budget that allows you to monitor your expenses and plan how you will start saving.
In this way, once your expenses are controlled, you can allocate a monthly amount to your savings account. In some cases, starting to save regularly involves automatically transferring a portion of your salary to a savings account or mutual fund.
The idea is this : if you don't see it, you won't miss it.
3. Maintain an emergency fund
Before committing your newly established savings to volatile and hard-to-reach investments, make sure that you have at least the amount equivalent to a period of three to six months of expenses saved in an emergency fund to resist in difficult times. Maintaining liquid money will guarantee that you will not have to sell investments when their price is low, and will also guarantee that you can always dispose of it quickly.
4. Pay your credit card
If you are trying to save while having a large balance on your credit card, at an interest of, for example, 19.8%, think that paying off the debt represents a guaranteed return of almost 20%. Once you have paid your credit cards, use them only for your convenience, and pay the balance in full every month.
5. Assure your family
Crisis situations such as job loss, a lawsuit, illness or accident can be financially devastating if you do not have appropriate insurance.
The insurance key is to cover only those financial losses that are so large that you cannot face them. If someone depends on their income, they need adequate life insurance. Long-term disability coverage will also be important as long as you need income from a job. Make sure you have adequate liability coverage in home and car policies.
To save on annual premiums, you could possibly increase your insurance deductible or eliminate double coverage. And when you buy insurance (life, home, disability or car), be sure to look for different options, and acquire them only from a reputable firm.
6. Take advantage of the benefits of the savings fund and the retirement fund (AFORE)
If your employer offers you a savings fund that involves contributing a certain monthly amount of your salary, take advantage of it, as the company often gives you an amount equal to the amount you give. Contributions to the savings fund mean that your investments can increase at a much faster rate than in any other way.
Likewise, if you wish to obtain a tax benefit through savings, additional contributions to your AFORE grant you the possibility of deducting the sums from income tax.
7. Diversify your investments
When it comes to managing your risks to maximize your performance, it is worth diversifying. It is important that you diversify between three types of assets: cash, stocks and bonds. Once you have decided on an allocation strategy between these three kinds of investments, it is important to diversify within each asset. This means buying multiple shares within a variety of industries and acquiring bonds with different expiration dates.
Simply put, don't put all the eggs in the same basket. Also, don't make the mistake of putting most of your money in “safe” investments like savings accounts and money market funds. In the long term, inflation and taxes would devour the purchasing power of your money in these “safe shelters.”
All investments involve some compensation between risk and return. Diversification reduces unnecessary risk by distributing your money among a variety of investments. In addition to diversification, the only most effective strategy is to continually invest over time, with a long-term perspective.
8. Make a will
The way in which a capable person can dispose of his property and rights, declare or enforce duties after his death, is the preparation of a will.
There are several ways to prepare a will, but the most common is the open public will, which is granted before a Notary Public, who will write in writing the provisions of the will, which contains the will of the person on how to leave their property, rights and obligations. You can also consult your lawyer to find other ways to prepare wills and decide which one is the most convenient for you.
The most important information that should be taken into account for the preparation of a will in Mexico is:
Generally, at least one executor should be appointed (although there may be two or even appointed substitutes) who will be the person in charge of managing and distributing the assets.
When there are children under 18, a spouse or parents unable to work and without sufficient assets to survive, the will must protect these persons; but if there are no minors, it will be possible to inherit whoever seems best.
Also, when there are children under 18, in the will a guardian must be appointed who will be responsible for monitoring and protecting the child (and their property) in the event that you become missing.
When there is no will, the assets will be distributed among those who consider themselves entitled to inherit, being these: the descendants (children, grandchildren), spouses, ascendants (parents, grandparents), collateral relatives (brothers, uncles, nephews, etc.) inside of the fourth degree and finally the concubine, only in the absence of any of these relatives can inherit the Public Charity.
Therefore, it is important that you prepare your will, so that your will is enforced and not leave the people you want helpless, starting by making an inventory of your assets, deciding who they will inherit and always, in case if there is a minor, leave him assets to subsist and appoint a Guardian so that he can represent him exclusively.