The idea for this talk was born after several years of personal research, where I tried to understand how I should organize my finances in order to achieve my goals and my dreams with the money I generated from my work. The road was long, but finally, here is the summary of all that research. These tips can help you begin your journey to properly organize your personal finances.

Create a personal financial budget and record all your expenses!

It is essential to start organizing your finances that you know very well what your monthly income and expenses are. And for that, your best ally will be excel! I know that for many, it is a totally unknown terrain, but luckily today, thanks to Google Drive, it is available to everyone and everywhere. For me, it was what worked best for me because having my budget in the “cloud”, I can check it from any PC with internet access, and I can always keep it orderly and controlled!

In general, the first budget that we put together is quite theoretical, and we lack several or a lot of expenses that we do not have registered in our heads. To improve our estimates and have control of our finances we have to know the reality of the facts and the expenses, we have to know how, on what and when we spend!

Control your debts

Another issue that must be analyzed once you put together your budget is the% of your income that corresponds to debts, which can be: debts to family/friends, loans of any type of credit cards. The sum of the amount corresponding to the monthly debt payment should not exceed 35% of your income! If that happens, Ok, we have a problem! and you have to put together a plan to get out of this situation!

Credit card debts, for me, are the worst of all because if we don’t control them, they can increase very easily! So if you have debts of this type, it is essential that you identify the total amount of your debt month by month and verify that it is decreasing and not increasing! Many times even without using them, if we do not pay the total, the interest month by month increases our debt!

Create an Emergency Fund

Once you know your monthly income and expenses, you can start to build an emergency fund for possible contingencies such as something breaking in your house, some type of medical treatment that is needed in the family and social work does not cover, some atypical expense that arises or even if some of the people who generate income in the family are left without a job. Having an Emergency Fund allows us to live peacefully and is a gesture of love towards the people who live with us because with this fund, we are protecting ourselves, and we are protecting them. So if you don’t have it, don’t hesitate and start generating it.

The amount of the Emergency Fund should be at least 3 times equal to the fixed costs that are in your budget, and ideally, it would be equal to 6 months of the total budget expenses. For example, suppose that my monthly fixed costs are $ 30,000 and my variable costs are $ 20,000; in total, I have $ 50,000 of monthly costs in my budget. Well my minimum emergency fund should be $ 30,000 x 3 = $ 90,000 and ideally it should be $ 50,000 x 6 = $ 300,000.

Define your financial goals

Without goals, there is no plan, and without a plan, there is no effort. In order to keep your finances in order over time, it is essential to define savings objectives in the medium and long term.

Since if an expense goes against your objectives or takes you further away from it every day, you are going to question it, and you are going to try to avoid it. On the other hand, if you do not have a clear objective, money can freely enter and leave your life because it does not have a specific destination and therefore makes it more difficult for us to generate savings and maintain order in our finances.