How can I improve my personal financial health

We'll give you some advice to help you improve your personal finances

The use of health as a metaphor is perfectly applicable to almost any economic situation: that of a home, or a company, or a country. And speaking of economics, maintaining a good balance between expenses and income in your day-to-day life will let you enjoy economic health, which will in turn allow you to manage your finances with comfort rather than with hardship. But how can you improve your personal financial health?

Personal financial health is one term we can use to refer to the economic situation of any individual. In this article you will learn about some ways to strengthen your day-to-day financial health.

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Financial health

Just as is the case with our physical health, financial health is the result of a healthy lifestyle. Translated into purely economic terms, the bottom line is that you must spend only as much as you earn, while also making an effort to save. In other words: good health in economic terms is achieved when an individual's monthly income is sufficient to satisfy his or her basic needs, to cover any possible commitments to saving or paying off debts, and above all, to ensure a stable economic future. For example, there is widely applied golden rule in relation to this known as 50-30-20, which represents a good option for balancing income and expenses.

The 50-30-20 rule recommends dividing your income into three different types of expenses: half of your income, or in other words 50%, must be dedicated to covering your basic needs; about 30% of your spending should be dedicated to things that are useful or attractive, but not essential; and 20% of your income should be dedicated to savings, ideally held in a separate account that will generate additional interest. This type of economic control ensures good management of your income, while also allowing you to create a financial cushion to help cover any sudden or unexpected expenses that may arise. In order to create a 50-30-20 plan you must establish how much you earn, how much you spend, and how much you can save.

The savings plan

We are often told that we should take a preventive approach to caring for our physical health, and the same is true for our financial health. In this case, however, you do not need to take any special pills or vitamins, or spend long hours at the gym: you just have to save. One of the most typical recommendations is that your savings should be approximately 20% of your income. This is an approach that will allow you to comfortably cover the expenses you will face in the future. You can use the money you have saved to pay for unexpected expenses or needs for repairs that come up suddenly, so that these events will not have a noticeable impact on your day-to-day budget.

Where can I save? There are undoubtedly a number of different approaches for this.

  • Controlling your spending: any amount you earn but do not spend can be set aside as savings.
  • Managing extras: Take maximum advantage of any extra payments or bonuses you receive.
  • Saving systematically.
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And how? By using the tools that banks provide in order to help you do this! With BBVA Bconomy, the new tool in the BBVA app, you can access features that will give you all the information on your finances that you weren't aware of before. This latest feature from BBVA will allow you to monitor your expenses and establish the goal of achieving the desirable 50-30-20 balance. You can also analyze your consumption patterns in detail, and discover ways to reduce unnecessary expenses, all of which can help you achieve the financial cushion you need. Do the things you've always wanted to do.
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