Main ways to save money

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Saving is often presented more as a challenge than as standard practice. From an economic point of view, human beings also tend to act with certain emotional biases. One of them is prioritizing immediate rewards over future rewards: we would rather spend than save. This tendency to be guided by impulses and seek immediacy makes saving harder for many users, who do not take advantage of their income as they could. However, there are different tools and techniques that can help improve personal saving habits. Keep on reading to see the main methods of saving money.
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Applying techniques and methods of saving

There are different methods of saving recommended by experts. Although not all are suitable for an individual's particular needs, it is always worth learning about them, trying out the different methods until achieving results. Some of the most common are based on strategies such as the 50/30/20 rule, the envelope technique and the piggy bank technique.

The 50/30/20 rule is one of the most representative methods of saving; it consists of dividing the income into percentages, which are allocated to specific objectives. In this case, 50% must cover current day-to-day expenses, 30% can be spent on leisure and treats, and the remaining 20% is saved. There are variants that use other percentages or a more detailed breakdown, but the concept remains the same: organizing income to cover needs and ensure that some is reserved for the future.

The envelope technique consists of establishing a monthly budget for leisure and treats. The point is that this budget is not just an intention, but the amount in question must be put in an envelope at the start of the month. Once this money has been spent, the user has to choose other leisure activities that do not cost money and wait to spend more until the following month.

Similarly, the piggy bank technique forces the user to save part of their income physically, but in this case, it is the income intended for saving. The principle is known to everyone, but for this method to be effective it is essential to structure or systematize the amount put into the piggy bank and how often it is put in. Some of the most common systematization strategies are: selecting coins of a certain value or putting the money invested in other items, such as drinks, coffees or cinema tickets, in a piggy bank.

Monitoring expenses

Many saving techniques place importance on the fact that you can visualize the money spent and saved. This is the reasoning behind keeping a record of your expenses. Looking at the money allocated to the various items allows the saver to be more aware of the state of their finances and organize them better.

There is no one right way to do this monitoring. Some experts advocate writing down all this information by hand, as this takes the user more of an effort and requires their focus. There are notebooks specifically designed to do this, such as those created for the Japanese Kakebo method. You can also use technological resources such as spreadsheets and mobile apps to make this monitoring easier or automate it.

Changing consumption habits

In most cases, as well as paying attention to what is spent, it is also necessary to change consumption habits. This greatly reduces expenses and increases savings.

The most obvious way to achieve this is to reduce consumption. Turning off lights when not in the room, not leaving appliances on standby and putting on another layer of clothing instead of turning on the heating are simple measures that not only reduce expenses, but also benefit the environment. Similarly, another way to reduce consumption is to avoid buying what is not really needed.

There are some tricks to eliminating impulsive or unnecessary purchases, such as planning meals in advance and writing a list before going shopping. Likewise, if you are going food shopping, it is recommended not to go when you are hungry, as cravings can get the better of you. Habits such as avoiding shopping malls in the middle of the sales can also help.

Getting used to comparing prices and looking for cheaper brands is another habit for saving efficiently. Many store brands are good quality and lower priced than their competitors.

Making savings profitable

When the income is limited, the results of the previous methods are also limited. This is why it is a good idea to study the options available to obtain the highest possible returns on your savings. Financial institutions offer a wide range of savings and investment products, such as investment funds, savings plans and deposits. To choose the best option, it is essential to consider certain factors. 

Before deciding where we put our money, we need to answer a number of questions: why we are saving, the term we have available, what options have more tax advantages for us or the liquidity needs we expect to have. This will also help us determine our risk profile and, therefore, know which options are suitable for us and which are not suitable.

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One concept that we need to be very clear about is the risk-return trade-off. They are directly related, so the greater the returns we are aiming for, the greater the risk we have to assume. Investors with a longer time frame may accept risks that may not be taken by those investing in the short term.

Finally, other conditions such as the terms, the minimum and/or maximum investment, and the fiscal implications also provide very valuable information. Many products guarantee returns only if a specific term is met or if they do not exceed investment limits; these factors can affect the results of the savings.

Now that you know about the different methods of saving, it is time to apply what you have learned to achieve results as soon as possible. At BBVA, we offer you different savings and investment products to help you achieve your savings goals. Visit bbva.es or go to any BBVA branch to find out all about it and choose the one that best meets your needs.

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