How are you managing your personal finances today? Whatever the answer is, whether you end the month in the red or in the blue, there is always room for improvement in your relationship with money.
Personal finance is the name given to everything related to the financial sphere of an individual, applying the same financial concepts used in a company.
This means that in personal finance you will hear about budgeting, planning, and cash flow, among other tasks that are part of this important aspect of your life.
In this text, we will deal with topics related to your personal finances, so that you get to know the secrets that differentiate millionaires from the vast majority of people when it comes to money.
Don’t you understand why “the accounts never close”? Do you never have “enough” money left over to invest? Are you always in the red? Does your net worth never seem to get out of place?
Now it is time to understand how taking care of your personal finances is fundamental to all of this.
Want to know how millionaires do it? Now is the time, let’s go?
What Is Personal Finance Management?
When we talk about personal finance management, we are referring to all the planning and control actions of your household budget.
It is present from the smallest choices, such as the brand of toilet paper, to the big decisions, such as when deciding to finance a vehicle or property.
It is these small and big decisions that, together, make up your budget and determine your financial situation.
It is all part of planning, which is what sets goals and ensures that you will work towards achieving your dreams.
When it comes to planning, it is important to be realistic about the amount of your income and your earnings expectations for the coming months.
The expenses must also be in accordance with reality, always stipulating an amount that corresponds to the reality of your current average expenses, and not a goal of what you would like to be spending.
In the end, the goal is to have a more organized budget and a more stable financial situation to deal with crises, unforeseen events and emergencies.
Why is it important to understand everything about personal finance?
Understanding personal finance is as basic and fundamental as knowing your way home, using the internet, or the telephone.
Money is an integral part of our lives, without which we cannot have access to practically anything: from the basics to leisure.
Those who do not understand personal finance are hostages of a system created to keep people in debt and unable to invest.
Don’t think that those who drive an expensive car, live in a big house in a noble location and have luxurious habits understand personal finance or are even rich.
In truth, these are strong indications of indebtedness and total inability in personal finance.
Many times these people who “appear to be”, are highly indebted in order to “maintain an image” that, if they were to dedicate themselves to their personal finances, they would realize is at odds with their financial reality.
The knowledge of personal finance will allow you a virtuous circle that starts with taking care of your budget and financial self-knowledge, to culminate in investment and personal enrichment.
What are the benefits of taking good care of your personal finances
The main benefit of those who take good care of their savings is in the greater comfort and security in the budget.
Those who are well organized can easily identify waste and point out expenses that can be cut to ensure a gap in time to close the month’s bills, save and invest.
Besides knowing exactly where your money is going, you avoid falling into expensive sources of credit that lock you in with abusive interest rates.
In the end, those who take good care of their finances live a more peaceful life with less pressure, because they are prepared to deal with the unforeseen.
Spend Less Than You Earn
Did you notice that we talked about “budgeting” and “financial self-knowledge”? It seems obvious, but it all starts with “knowing yourself financially”.
Believe it or not, many people are not even in the habit of looking at their bank statements – and if this is the case, how can they know their personal finances?
So it cannot be said often enough: the basics are the most important.
Start making a habit of looking at your statement frequently, identifying exactly how much is coming in and how much is going out, to get to the crucial point of personal finance: spending less than you earn.
It is elementary, isn’t it? But many people can’t do it. Worse yet: the lack of knowledge about personal finance is so great that, believe me, there are those who think they spend less, when in fact they spend more.
How is this possible? Credit mechanisms, with supposedly interest-free installments, that “create a feeling of purchasing power” without actually having it.
And since the debt is constantly “rolled over”, a false sense of compliance is created, after all, the account is in the blue.
However, the accumulation of installments and interest, at some point, will bring reality to the surface, so that it will be very difficult to reverse the situation.
And all these problems converge, again, to the same point: lack of knowledge and interest in personal finance.
From the moment you acquire the basic knowledge, so that your personal finances are an integral part of your routine, the task of spending less than you earn and, consequently, investing this difference becomes much simpler.
Monitor Spending (How to control your finances)
We have talked about “spending less than you earn”, haven’t we? Well, you should know that to achieve this you need to control your spending.
And since you can’t control what you can’t see, it is essential that you start writing down every expense you incur.
In this instant, it doesn’t matter if you do it through an application, a spreadsheet, or using a notebook.
The important thing is that you do it, so that you know exactly how you are spending your money, you can identify possible waste and get your personal finances under control.
And when you identify them (the wastes), cut them mercilessly. In this way you will learn how to control your finances.
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IMPORTANT: There is no expense that cannot be reviewed, not even housing.
The most important thing is to pay your bills on time, to be able to invest, to live better. This is the fundamental role of good care with personal finances.
By starting to monitor your personal finances, you will soon notice a significant change in your habits and, consequently, you will see the fruits of this effort in the form of savings and investments.
How to Build a Successful Retirement
Before you go on, we recommend that you read this text about savings.
In it we talk about how you can lose money in savings or even in other products from your bank, and how Rico can help you make your money grow, through safe investments with much better returns.
As well as providing support at every step of the way, from opening an account to investing your money.
And the broker is an important part of your personal finances. It is the trusted partner to help you with your financial goals, such as your retirement.
To build a successful retirement, first of all you need discipline and stick to the basics: control your spending so that you spend less than you earn.
Once that’s done, it’s time to think about the time frame in which you intend to retire and how much would be enough.
Once you have done this, it is time to look for the investments that will take you to your desired goals and define how much money you will need to invest every month.
It is important to remember to increase the value of the investments every year to compensate for inflation. And throughout this process, Rico will be here to help you.
Personal finance is this: objectives, deadlines, goals and, based on this, the choice of investments that will help you achieve them.
Never forget that, over time, corrections and changes will have to be made, since the economy is in constant motion.
Once again: count on us so that your personal finances lead you to a winning retirement.
15 Personal Finance Tips
Are we going to learn, for real, how to organize personal finances?
For this, we have prepared a series of practical tips that are easy to apply in your life.
Check it out!
1. Transform Your Financial Life With the 50-15-35 Rule
Have you ever heard of this rule? Well, it is quite simple. It consists in applying a metric to the idea that we always repeat: objectives and goals.
The concept is simple: divide your budget into three percentages of where your income should be directed (or 3 limits to your spending):
- 50% for essential spending
- 15% for financial priorities
- 35% for lifestyle.
This means that everything that is basic and fundamental should not exceed 50% of your budget: housing, utility bills, education, and so on.
Next, financial priorities should be limited to 15% of your budget.
If you are in debt, this is the portion that should be channeled to the payment of these commitments.
Otherwise, this percentage should be allocated to saving and building equity.
Following the two previous parameters, you will get 35% of your budget to spend on things you like and that bring meaning to your life: outings, hobbies, restaurants and everything else that defines and motivates you.
Without these things, personal finances are compromised, because life literally loses its fun.
So be careful about labeling things that bring you joy as “superfluous”.
2. Renegotiate Your Debts
Those who want to organize their personal finances to get out of debt need to start by renegotiating the amounts owed.
This moment is essential for you to understand the amount you need to pay – information that should guide the rest of your financial planning.
In addition, by renegotiating, you can often put the brakes on the interest that increases your debt.
3. Make a Personal Financial Plan
Many people think that personal financial planning is a big deal. But it isn’t.
In fact, the big secret is to be simple and functional.
The basis of any planning is simply to set deadlines and goals.
In short: it is to know what you want, when you want it, in order to plan how you are going to get there.
4. Put Together a Spreadsheet of Monthly Expenses
Personal finances are nothing without control.
So how about starting to make your monthly spending spreadsheet?
Better yet: there are many ready-made spreadsheets for you to start right now.
5. Build up an Emergency Reserve
Another important point to get out of debt is to build up your emergency reserve.
Stipulate an amount and save it little by little until it reaches a substantial value.
By saving a good amount, you ensure that you won’t need to resort to expensive credit in times of crisis.
And of course, the money you save should not just sit in a drawer or in a savings account.
To protect your emergency reserve from devaluation, it is important to look for investment alternatives that have a profitability above the inflation rate.
Thus, you protect your assets and ensure that you have capital saved to help you in times of crisis.
6. Learn Accounting From the Rich
Rich people are not rich for nothing.
One of the main things that sets them apart from other people in the world is the incredible attention they pay to their personal finances.
And since knowledge means power, they know enough about every aspect that involves their money.
And one of the most important aspects, ignored by most people who fail to get rich, is “accounting”.
You have to understand the basics of accounting in order to hire a good accountant and thus avoid losing money.
We are not talking about anything illegal, quite the contrary.
Wealthy people know accounting in order to avoid unnecessary taxes, money that in their hands only makes their wealth grow.
Note that, every time you read a millionaire’s biography, part of their secrets will always go through impeccable accounting and tax knowledge.
The secret of those who have it: never lose money when it can be avoided.
7. Use Technology to Your Advantage
Did you find the financial spreadsheet a bit cumbersome?
Good thing there are companies developing financial apps to make your life easier. Financial control apps are the best friends of your personal finances.
The big advantage, besides the simplicity of use, is mobility.
As most of them have a smartphone version, you can launch your expenses on the spot, without waiting to get home, running the risk of forgetting.
There are also applications that connect to your current accounts, making the entries automatically.
All you have to do is create categories for each expense, such as “housing”, “transportation”, “education”, to name a few, and set goals (or limits) for your spending.
Fantastic, isn’t it?
Now, you have no more excuses and should no longer put aside your financial control.
8. Save Some of Your Money and Invest It (Even if You Earn Little)
Earning little is no excuse for not saving.
Remember the 50-15-35 rule? It fits any budget.
The big secret of personal finance is not to keep trying to adapt your earnings to your life, but to adapt your life to your earnings.
So make an effort to set aside 15% of your earnings to save and then invest.
Forget this money and condition yourself to live with the remaining 85% and adapt your life to it.
Thus, with discipline and patience, you will see your assets grow.
And from that point on, use everything Rico offers you to choose the best investments.
Your money will grow faster and you will reach your goals.
9. Learn How to Save Money
Saving money is an important part of personal finance, which is why we talk about it so much.
And as obvious as it may seem, saving money comes from cutting waste – it’s as simple as that.
And once you start keeping track of your spending, it will be very easy to identify it.
In a nutshell: waste of money is everything that you pay for but don’t use, or the expense for which (if you use it) there would be a cheaper option.
Some practical examples:
- Pay TV: if you don’t use it, cancel it
- Telephone: see if your plans are adequate to your consumption. You can always spend less
- Subscriptions in general: People are known for subscribing to a lot of things and not canceling them. Whether it’s a streaming music service or that magazine you never read, cancel everything and only pay for what you actually use.
Whether it’s the gym you don’t go to, or a car that stays in the garage and you don’t use, the same reasoning applies: only by cutting waste will you be able to save and see your assets grow.
10. Stop Losing Money on Savings
Here at Rico we have a motto: “do you want to make money from savings? Then take your money out of it.
Its yield is so low that it often does not even cover the losses caused by accumulated inflation.
In other words, by keeping money in savings, you see it lose value instead of increasing your net worth.
11. Get Out of the Banks and Invest Better
You have heard us say more than once that “banks are no place to invest”.
So get ready, because we are going to repeat it once again.
Good practices in personal finance involve choosing partners that offer you better opportunities at lower costs.
Of course, to invest through Rico, you need to have a checking account (in a bank) in your name.
But you don’t have to pay high maintenance fees, as there are many cost-free checking account options.
Even worse is to entrust the bank with your investments, with low rates of return and very high costs.
Retirement in the bank’s private pension plan? No way!
Rico has better options and, as we said before, is prepared to help you on this important journey.
12. Learn and Teach Your Family About Personal Finance
When we live as a family, it is essential that everyone is engaged around the common goals of the house.
And, with personal finances, it’s no different: if everyone is in tune, the results will be much better.
That is why it is important to create a family dynamic, with a moment for personal and family finance issues to be addressed.
Set a day of the month, create a ritual and make this commitment.
It is important that it be a serious, but enjoyable moment. And that, over time, everyone can celebrate together the achievements and face the challenges.
Of course, if you have very young children, you must wait until they are old enough and discerning enough to participate in this moment.
There will always be something to teach and learn.
Encourage everyone to do research and bring new subjects to each meeting about personal finances.
Soon you will see the benefits of learning together, as well as the determination to build a solid future in a participatory way.
13. Retire Your Credit Card
Although the credit card is nobody’s enemy (on the contrary, the only enemy from a financial point of view we have is ourselves), we cannot deny that it is a tool that can lead to financial problems.
There is a “psychological trap” in using a credit card, which is the fact that you “don’t see” the money actually being spent.
This causes a false sense of “not having spent”, especially when there is a positive balance in the current account (forgetting that you have already spent that money on the card).
When you start using “cash” or even “debit cards”, you are taking advantage of a powerful tool in personal finance.
And believe me: it inhibits impulse buying and, because of the “difficulty” of seeing the money go away, it will make you spend less.
14. Don’t Listen to Your Bank Manager
As we have said before, banks are not interested in anything but their own profit.
And the manager, as a bank employee, no matter how much he says otherwise, serves the interests of the institution and not the client.
Thus, he will offer you a series of products whose only beneficiary is the bank, such as, for example, capitalization bonds, which is a product that has practically zero income, with the promise of drawing prizes.
In personal finance, bonds like this are financial suicide.
This is just one of many examples that can be given.
So, whatever your manager offers you, do your research, get informed and make smarter choices.
Rico can help you.
15. Have the Brokerage House as an Ally
To complement the previous topic: we would like you to always see Rico as your ally, your partner.
Our main interest is that our clients prosper, after all, our clients’ gain is ours too, without demagogy.
So please come to us whenever you need us.
For every decision involving your money, we have the resources and knowledge to guide you all the way so that, in the end, you will reap the rewards you have dreamed of.
Note that every millionaire has a brokerage house as a partner, and this is always within your personal finance horizon.
How about starting right now?
Bonus tip: How to take care of personal finances in a time of crisis?
During the crisis, uncertainties increase the difficulty to organize and take care of your personal finances.
But this does not mean that all is lost.
The period requires extra caution to ensure that you are not making a bad investment or committing to a financing that is too expensive.
To get through the crisis unscathed, the ideal is to avoid acquiring new debts in general.
The economic downturn requires even greater discipline in finances to cut costs and save as much as possible.
This is the only way to get through the crisis without compromising your assets.
Best investments for 202X
Although interest rates are falling, fixed income in most countries still offers diverse possibilities.
It is worth, for example, for those who are still stuck in savings accounts and for those taking their first steps in the financial market.
Likewise, there are fixed income investments that should be part of a diversified portfolio, in order to balance them with the risks of variable income.
It also serves as a strategy for building an emergency reserve that will cope with unforeseen events.
In other words, no matter at what level the Selic rate is, fixed income will always be one of the best investments.
But beware: we are not talking about savings, but about financial investments such as Treasury Direct, CDB, LCI and LCA.
As they all have similar characteristics in some points and different ones in others, it is necessary that they are aligned with your goals.
In fact, this is a very important point to evaluate: what you intend to do with the money.
Along with that, decide based on your investor profile.
When you become a Rico client, you answer brief questions that help us understand whether you are conservative, moderate, or bold when it comes to investing your money.
For the bold, for example, investing in stocks and mutual funds are always great alternatives, with the possibility of much higher returns but proportional risks.
Whatever the case, Rico is ready to help you choose the best investments.
Moreover, we have a wide range of materials, texts, e-books and videos to help you learn as much as possible and invest well.