6 min read
Do you want to save to invest, buy a house or simply to have an emergency fund and you just can’t? There are ‘imperceptible’ money leaks that, if you don’t control, will keep your wallet in the emergency room.
Nu México , a financial services company through technology, did an analysis on personal finances and found that there are four main habits that do not allow people to save money , and that basically result from not keeping track of how much is earned and how much it is spent per month.
“These money leaks might not be on your radar, but if you detect them in a timely manner in your consumption habits, they can be the difference between an account in the red and a comfortable little safe”, explains Iván Canales, senior director of product at Nu México .
Habits that don’t let you save money
Image: Alexander Mils via Unsplash
According to the Nu México study, considering a monthly budget as part of a routine can be a great first step to have visibility about our personal finances. Likewise, taking some immediate “precautions” to eliminate habits that prevent saving within the daily routine is an action that will improve the health of our portfolio almost instantly.
1. Spend on impulse
The latest National Survey of Income and Expenditure in Mexican Households of INEGI, identified that Mexicans who choose to save, allocate around 8% of their total income for it. This against 11% that goes to the purchase of designer drinks, gadgets, fashion and tobacco. Many of those purchases could be defined as “nonessential”, therefore, they will rarely be planned within a budget.
This can be a problem when, in addition to being impulse purchases, they are made in installments, because when adding all the monthly payments to be paid they always end up losing control of the monthly budget -if they were not planned-. This can be confirmed by any fan of franchise coffees, who can spend up to 21,000 pesos a year buying the same latte five times a week.
How to change this habit:
- Assess the need to spend. A good tip is to make a habit of always researching prices and options before finalizing a purchase, which at the very least gives you more time to think.
- Check your card limit and account balance before making an unplanned purchase. Remember that your line of credit is not an additional reserve to your salary.
2. Do not plan your “purchases in months”
Use your credit wisely. The credit card and the various payment methods it offers are tools that must be used strategically. For example, choose the maximum number of months to put all your purchases in Interest Free Months. This is not necessarily a mistake, as long as that choice is consistent with your line of credit and your ability to pay. It is necessary to consider that the monthly payments compromise your credit limit and in that situation, you would be restricting future purchases that could be of first necessity.
In a couple of months, this lack of planning can lead you not only to have how much or how little you have been able to save, but even to look for financial alternatives to cover expenses at the end of the month. If your line of credit is blocked, you could come to contemplate certain types of ‘rescue’ credits with very high interest rates.
How to change this habit:
- Check your credit limit and consider always having a part unlocked. Make a list of the monthly payments already committed and decide the number of installments of your next purchase from MSI.
3. Always pay the minimum of the card
Paying the minimum balance of the account statement, of your credit card, means transferring the rest of the debt to the future and paying it with interest. Unquestionably this has the potential to quickly turn into a snowball. The option to pay the minimum should only be considered if you really have trouble paying the full balance. But in such cases, the minimum is better than simply delaying the full payment.
How to change this habit:
- Constantly review your account statements.
- Acquire the highest possible visibility, so that you can plan your spending capacity well without having surprises at the beginning of the month.
4. Not controlling ‘small expenses’
It is not realistic to imagine that all people can (or want) to record each of their small daily expenses. However, you should have at least an idea of the magnitude that the sum of these expenses represents in your monthly budget. If the expenses that someone categorizes as sporadic become daily (online games, streaming platforms, food delivery, etc.), you will have to pay attention to what could be the end of the balance in your personal finances.
It is not that those products and services cannot be part of our options. However, it must be taken into account that these can become exponentially more expensive than other similar services that are managed in a traditional way, without the costs that an app represents and without automatic renewals. This automatically translates to: save.
How to change this habit:
- In general, controlling the expenses that are already direct debited to your credit card is a great first step to guarantee that what seems like a small sporadic expense, does not turn into a drain of thousands of pesos in the monthly budget.
