It seems obvious, but in order to learn how to manage our money, it is essential, first, that we have earned it. Diversifying our earnings is a strategy that can shield us against a possible recession or an unforeseen event. At 11Onze we have compiled three basic tips for doing so.

In times of uncertainty it is key to know how to respond: how to save, how to make those savings grow and how to control expenses. It is difficult to be experts in finding answers to all three questions at the same time, but if we understand the concepts behind each of them, we have a much better chance of managing our money properly. Not only will we learn how to cover our basic needs, but we will know how to enjoy them and we will be very clear about when we have to do without those that are not as basic as we thought.

Saving: at least 10% of income

It is often said that saving is the main basis for financial success. It is having money in savings that gives us the ability to respond to unforeseen situations —be it incapacity due to illness or unexpected charges— start a business or go back to school. But it is important not to confuse saving with investing: while the former gives us peace of mind, even in times of global economic crisis, investing can make our savings multiply, but it can also be a source of worry and cause us to lose our liquidity.

One dilemma we may face is whether to pay off debt or save. It all depends on the interest rate of the debt. In cases of high interest rates, such as credit cards, it is generally preferable to pay off the debt to zero before considering saving. But in cases where the interest on the debt is low, such as a mortgage or even a personal loan, it makes sense to save and at the same time pay off the debt slowly.

Slow growth, low risk, and vice versa

A savings account has been the most traditional way for people to grow their money, especially for the more conservative and risk-averse. But with interest rates relatively low and inflation visiting us much more often than would be desirable, other forms of investment are gaining ground, especially in the face of an increasingly financially literate clientele with a relatively higher purchasing power than previous generations.

At this point, the range of investment products on offer is extensive and varied, with different levels of risk. Everyone needs to be aware of their financial knowledge and, above all, of the amount of money they are prepared to risk and lose, especially if the expectation of growth is high and in the short term. It should be borne in mind that an investment manager can be a very good option when it comes to choosing a financial product that will substantially improve the profitability of our savings.

Spending: necessity vs. desire

Obviously, we will not save everything we earn, but we must distinguish between two types of expenses:

• Basic necessities. Here we count expenses that are basic necessities for living, such as food, accommodation, electricity supplies, water, public transport, among others. 
• More superfluous goods and desires. By elimination, we include everything that is not strictly necessary. This would include impulse purchases, luxury items, leisure travel, etc.

Making this distinction does not imply that we cannot spend money on things we want, but do not need. Desire and actions that do not have a purely practical purpose are part of the human condition. This is a fact. Therefore, we also have to allow ourselves these expenses, as long as we adhere to a pre-established budget, be it weekly or monthly.

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