PERSONAL FINANCE MANAGEMENT

Five steps to prioritize your expenses

One of the main actions to start changing the financial reality is to be aware of it and learn to prioritize expenses. Learn here how to prioritize spending to better manage money and achieve greater well-being and peace of mind.

1. Identify all your expenses

Yes, all of them, even if one or several of them seem small, you must also take them into account, it is the easiest way to know what you spend your money on and how much you spend on each thing.

You can classify your expenses (housing, food, transport), carry them automatically by connecting to your cards or, if you prefer, add them manually.

2. Sort the list you have into categories

One way is as follows:

  • Basic expenses: These are the ones you cannot afford to miss, they cover your basic needs: housing, social security (health and pension), food, utilities, transportation.
  • Non-basic expenses: They are related to your lifestyle, if you don’t have them they don’t affect your peace of mind, for example, a lunch or dinner out, an outing with friends, a hairdresser’s appointment, etc.
  • Debts: These expenses are financial obligations that you acquire with a bank, financial cooperative, family member or friend and that you must pay off in a certain time.

3. Take into account other items such as taxes or contingencies

Try to set aside a percentage of your income for the month to cover these expenses without complications.

4. Make a budget

From your income, make a budget for each of your expenses and always keep in mind that these cannot exceed or equal the total of the money you receive.

5. Incorporate financial health habits

An example: when you go to buy something ask yourself if you really need it or if it is just a whim; compare prices and look at different options, don’t stay with the first one; eliminate certain tastes and work on self-control, that is, think before you act, plan and organize your purchases.

Putting this into practice helps to have a different relationship with money, to be aware of every expense and to make better financial decisions, decisions that, in the short and medium term, will influence the well-being and quality of life.

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