If you have saved money beforehand specifically for this purpose, e.g. through the Smart Deposit, then congrats, you belong to the minor people group who do not rely on luck to take care of their financial future. If you haven’t yet discovered the magic of financial planning, I will try to explain why taking a responsible approach to your finances is only going to be beneficial for you and your family.

No one enjoys living paycheck to paycheck, praying that the washing machine or fridge will not break down. Furthermore, you are definitely going to be more comfortable knowing that all of your expenses for the upcoming period are covered and that you still have enough money left for any surprise bills. This is not an unrealistic goal. Even seemingly minor changes can fundamentally change your life. Let's see how:

1. Set Your Priorities and Goals Straight 

Go through each expense item by item and think whether you want to increase, decrease, or eliminate it entirely. Surely you will find expenses without which the quality of your life won’t change. If you have loans with an interest rate higher than 5%, consider consolidating them or repaying them early.

Likely, there will be greater space for adjustment among variable expenses (rather than fixed ones), so put in more time to take a closer look at it. If you were surprised that you spent tens of euros on useless things over the course of the month, consider making better use of that money.

At the same time, do not forget to take your priorities and goals into account, both long-term and short-term. Doesn’t matter if its decent retirement, achieving financial independence as early as possible, or perhaps buying a new car. It is for the best if you include them in your financial planning, so that you can actually reach them step-by-step.

The fact that we sometimes need to get a little frugal doesn’t mean that you shouldn’t use your money to enjoy life, quite the opposite. Many view experiences as an investment and the corresponding memories as returns or dividends. Of course, assuming such action won’t wreak havoc in your budget. If you wish to learn more about the concept, be sure to read this blog!  

In case you do not save a portion of your money regularly, find a place for it in your budget. Even at the expense of making cuts in other areas.

If you manage to cut your monthly expenses by 80 euros and decide to invest this amount, you will have approximately 45 291 euros in 20 years. After 30 years, your regular monthly investment of 80 euros appreciates to approximately 111 761 euros. This is a significant result if you think of it as saving less than three euros a day, isn’t it?

Try looking at all of your expenses this way. Budget cuts are not always painful. If you spend 60 euros per month on a coffee with a colleague from work, you can greatly reduce this amount and still enjoy it: once in a coffee shop, once at your place, once at theirs...

2. Track Your Spending 

If you want to get your finances into shape, you should foremost have an overview of what you spend on. Try to keep a record of all your expenses for at least one or two months. You will surely be surprised by the amounts you’ve spent on some categories.

Don’t worry, there’s no need to grab the pen and paper. The times have changed, and you can keep track of your spending thanks to the Financial Coach in the Finax App, for example. The neat part is that in order to be able to use the Coach, you don’t need to invest with us, all you need is to register yourselves in the Finax app for free. Be sure to read about the service here!

3. Create a Budget 

It’s definitely nice to be aware of your expenses, but it will be of no use unless you can adjust them. In order to achieve your goals and priorities, you need to have a plan, or in other words, a budget.

Once you have an established overview of where your money is going, the next step is to divide your expenses into fixed expenses, which recur every month and cannot be significantly influenced (e.g. loan payments, rent, utilities, etc.) and variable ones, which may fluctuate from month to month (groceries, hygiene, clothing, hobbies etc.).

Furthermore, make sure you know your total monthly incomes. If you cannot remember them, take a look at your paycheck or a bank statement. Do not forget to add any rental income or income from other sources. Adding up all of your incomes will create the income side of your personal budget. If you do not want to fall in debt, you have just found the limit of your maximum possible spending.

The neat part is, once again, not having to rely on pen and paper or an Excel spreadsheet since you can do it efficiently and easily thanks to the Coach.

The budgeting process will help you correctly identify your financial and life priorities. However, these are bound to change over time, so any budget that you create will eventually require adjustments to your future situation.

Changes in your income, expenses, or your needs and goals mean that you have to go through the process again. But speaking from experience, I can assure you that the second time will be much easier and more fun.

4. Try to Automate Where You Can

Once you've created your budget, set up rules that you will follow. Do not rely on memory. It is best to set up direct debits or standing orders for regular recurring payments, such as savings and investment account transfers, rent and utilities, internet and phone payments, etc.

Regular payments will automate your need for constantly reviewing (or ignoring) your financial commitments and goals. Nobody wants to compute every month whether they can afford to pay all loan repayments, how much money they need to set aside for the future, or whether they will have something left to survive until the next paycheck.

And as already mentioned, the Coach is here to help as well, especially with the expense-planning part.

5. Start Saving and Investing Now

If you typically do not have any money left at the end of the month, send them to your savings or investment account as soon as you receive your paycheck. Over time, you will learn how to get by with the remaining amount without any problems. It's just a matter of priorities and habit.

If you haven't set up an emergency fund, ideally covering at least 6 months of your expenses, set it as your first saving goal. Without an emergency fund, even a small financial emergency could have big consequences (a short-term loss of income, a broken car, etc.). Next goal should be pension investing (setting aside a portion of your income to secure extra income in retirement). Alongside retirement, you can start saving for goals like a mortgage down payment or the future of your kids.

Short-term goals can be achieved with our Smart Deposit or the Intelligent Wallet. For example, if you plan some larger expenses within the next months or years (Christmas gifts, a summer vacation, or a major home renovation), the best way to prepare is to save and appreciate the necessary funds gradually in advance. If you’re unsure which of our short-term products to choose, be sure to read this article!

Of course, you may also opt for the most common choice of saving at a bank, but do not expect to earn much interest in that case. As of now, the interest rates in banks and savings accounts are almost zero. The only purpose they serve is to separate money from the current account (so that you’re not tempted to spend your savings on everyday consumption).

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