The best way to achieve financial goals

It is entering the final stretch of the year. Sometimes it is important to take a short break and recap the events that have set trends during 2022. So far this year, according to the most frequent searches on Google, issues related to the World Cup in Qatar, geopolitical conflicts (emphasizing in Russia-Ukraine), the death of Queen Elizabeth II, movies, series, among other topics. What is striking are the questions related to the global concern of the population about the economic situation, in terms of investment and savings, which could be mentioned mainly: “Why has the cost of gas and electricity risen? ”, “What does a bear market mean?”, “How can you invest?”, “Is it time to invest?”, “Interest rates”.

After almost three years of being taken by surprise by a pandemic that would completely stop the world, it made us see the advisability of having or not having a savings or emergency fund to deal with eventualities that might arise; Likewise, for those who did not have that financial culture, they would be interested in beginning to foresee and budget for possible savings in adverse situations. Beyond any global eventuality such as the one mentioned, it is important to continue feeding that curiosity in financial culture and what better time than to do it from now on.

Just as every year all people start with new desires and goals, it is important to identify the financial goals they want, which can range from buying a video game, postgraduate studies, or planning the family’s assets. However, none of this is possible if a plan is not drawn up in accordance with the time to achieve these goals and the period that will be invested, but, above all, choosing the correct vehicle that will take you to the final stretch that you want to achieve.

If the aforementioned web searches are analyzed, it can be assumed that people are already more sensitive to the issues that affect their pocket on a day-to-day basis; they look for how to interpret events that affect financial markets and monetary policies. From here also starts the mission of financial institutions to be able to facilitate the language with which clients are communicated with events that are having an impact on their investments, savings and credits.

Creating a budget will help a lot to prepare the way to follow any plan, and of course, everything must be in accordance with the needs of each person. One of the proposals to start is the 50/30/20 distribution, where 50% of the net income (or after taxes) is for those “fixed” expenses that are necessary to live or comply with the day to day (and more considering the constant increase in the cost of services and basic consumer products), the next 30%, allocate it for those expenses that can be variable or not repetitive month after month, such as entertainment expenses, payment of debts, clothing and that “taste” that is often justified with the phrase “that’s what I work for”. The last, but not least, is the 20% that should be strictly oriented towards creating savings or an emergency fund and, in a complementary way, investing to obtain a passive income. It is important to bear in mind that you must first save and then spend, because there is a false belief that it is the other way around, which prevents it from being given the correct relevance.

Although the year is about to end, you should not miss the opportunity to analyze income and expenses to prepare the way you want to start the following year. From now on it must be essential to identify the objectives and the term in which they are to be achieved. Having a structured plan that can be consistently followed will be vital to achieving what each one sets out to do. Warren Buffet said it well: “Someone sits in the shade today because someone else planted a tree a long time ago.” The present is the best time to start and tomorrow you can “enjoy that shadow” generated by the investment.

*The author is Associate Client Servicing at BBVA Asset Management.

miguelangel.paez@bbva.com