The ultimate guide to managing your finances without losing your mind
Natalia de Santiago, a renowned finance expert with years of experience in the sector, gives us a lesson on how to manage our finances in her book Invest in Yourself. With a practical, enjoyable, and accessible approach, the author provides us with tools and strategies to improve our relationship with money and, above all, to be realistic and consistent with our financial situation.
Using an example close to reality with a large middle-class family, the author explains in simple terms to dummies (and not so dummies) what you should know to improve your financial health. Starting with the most effective techniques for saving and investing, and achieving more responsible management of your finances, this book will give you the keys you need to start organizing your financial future with confidence and without despair.
1. The foundations of financial education
The first lesson we start with is that we don’t need a high salary nor deprive ourselves of small luxuries to achieve a savings portfolio. All we need is to control our expenses, meticulously record data, and be consistent with our economic situation.
The first advice you should apply is: start shaping your Excel sheet. As Natalia recommends, spend an hour a month or even five minutes a week to note down all the expenses of the last few days with their corresponding categories, without grouping unrelated criteria. This way, once you close a plan for a year, you can make estimates for the next one based on what you expect from each expense, making it much easier.
2. Smart savings
Initially, experts recommend saving 20% of your salary, but realistically, this won’t be achievable for everyone. Nevertheless, within each person’s possibilities, you should set a percentage and preferably reserve it at the beginning of the month, as it tends to be easier. As with everything, you will learn what the perfect plan is for you as you readjust year after year. However, keep in mind that the key to maintaining the foundations of our financial health is the habit of saving.
To establish saving as part of our routine, a first step could be setting realistic goals to reserve a minimum amount through short or medium-term objectives that protect us from surprises. If you wonder how much this minimum should be, Natalia de Santiago estimates that the equivalent of six months of your salary should be sufficient to have a good cushion, also considering other important issues such as a retirement plan.
3. Investment and wealth creation
Once your budget is well established and you meet the first three points needed as a foundation for stabilizing your savings plan: the emergency cushion (preventing unforeseen events), the future (even if you are young), and medium-term goals (a trip or an event), it’s time to increase them, meaning to start investing to live better.
Here, many important factors need to be considered: where to invest your money, how much risk you are willing to tolerate, whether you should consider a safe option or diversify…
On the other hand, as the book title suggests, keep in mind that investing in yourself will never be a loss, whether in education or taking care of your health. In fact, it can be a great saving and an investment for the future if we take it as an option to continue growing with the goal of increasing your value, being receptive to better options, and making yourself difficult to replace.
4. The power of continuous education
Once you decide how and where to invest your savings, you have to consider a few things: start by investing the money you won’t need in the medium term, research, and don’t get carried away by trends, no matter how reliable they seem. Find out what fees you are paying, create a long-term investment strategy, a diversified portfolio, and stay informed, even if you take advice from those who know best.
Knowing what you are talking about makes it easier to find a more profitable option before accepting something lightly. Ideally, you should compare at least three offers before accepting anything.
5. Financial and personal well-being
Good money management can not only help us have a better economy but also relieve a great mental burden, reduce stress, and allow us to live much more calmly, always being aware of our possibilities.
In this sense, Natalia acknowledges that you don’t need to put all her advice into practice at once or that your financial health will improve overnight after reading this guide. However, starting to inform yourself and put these steps into practice as soon as possible, with order and patience, is already a big step and a good investment of your time that will lead you to greater stability and economic freedom at some point.