“The emergency in the spring was a harsh demonstration of the importance of having enough financial security for everyone, as unexpected financial difficulties can befall anyone, regardless of income. Now that an emergency situation has been declared again, it is advisable to think carefully about whether you have accumulated enough to take care of yourself and your family in the event of a loss of income or job loss, ”says Jekaterina Ziniča, Luminor Bank’s Head of Development in the Baltics.
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She gives tips on how to better manage your expenses and income to find a way to save for a white day.
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It’s easy to review large expenses, but small amounts of money often go unnoticed, such as daily coffee at a gas station or coffee shop.
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Such a small but regular spending together per month can be quite a significant amount that can be saved, for example, by making coffee to take home.
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“I recommend everyone review their bank statement for the last few months – it will show not only the most frequent spending, but also automatic payments for music or serial streaming platforms, mobile apps or even a sports club that you may not use at all. By reducing or waiving such payments, you can save up to several tens of euros a month, ”Ziniča points out.
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Planning helps to avoid spontaneous spending
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A good way to save is to plan your budget in advance to see how much money and what you can afford to spend. When planning a budget, it is recommended to divide expenses into categories: fixed payments (utilities, credit payments, etc.) and variable costs (food, transport, clothing, entertainment, etc.), which we can reduce by changing our habits. Reviewing spending and prioritizing will show what can be waived to save.
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One of the biggest groups of expenses is food – to reduce these expenses, it is recommended to create a shopping list. It can most often avoid spontaneous purchases and result in spending less.
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Good advice is not to go to the store hungry, because then we usually buy more food than necessary.
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Distribute income wisely
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A successful cost-sharing formula should look like this: up to 50% of income is spent on basic monthly payments such as utilities, food and credit, 30% can be spent on various minor purchases such as clothing, hobbies and leisure.
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The remaining 10-20% – as far as the family budget allows – should be left for savings or invested, for example, in a current account, savings account or 3rd pension level. Of course, more can always be allocated for savings, but if a person is able to follow such a formula, then he is on the right track, says the “Luminor” expert.
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Now is the right time to review the contributions to the 3rd pension level and make additional contributions, if possible, as at the beginning of each year it is possible to use the benefits provided by the state and get back the overpaid personal income tax on contributions made during the previous year.
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Choose the most suitable accumulation method
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There are several ways to create a habit of accumulating on a daily basis. One of the simplest ways is automatic payment in the Internet bank, transferring a certain amount to a separate current account or savings account on a convenient date each month.
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Another method is to transfer all the money left over from the previous month, if any, to the savings account just before receiving the salary – this could motivate you to postpone an increasing amount each month. On the other hand, any unexpected income – such as bonuses, tax overpayments, or birthday presents – should be evaluated and used for existing savings or used to start accruing for a new purpose.
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