Sometimes the hardest part of saving money is getting started. However, two out of ten people in Ecuador are in debt and their income does not allow them to cover all their debts, the data are from the Debtor Defense Association. What is best for my finances?

Personal finance refers to the financial management that a person or family needs in order to be able to plan, save and spend money in a certain time. However, a number of factors are taken into account such as income, expenses, assets, liabilities and possible economic risks that may affect the economy.

Financial coach Andrés Mórtola reminds that it is important to keep this in mind you need to borrow up to 40% of your income; because if that amount is higher, it would be considered over-indebtedness. At this point, they can no longer “generate enough income to cover the payment of contracted debts.

To determine the amount of indebtedness, it is necessary to determine fixed and variable costs and the percentage of savings. Fixed costs must include the payment of debtssince a percentage of income is used to offset the minimum amount of what is owed.

Financial coach Andrés Mórtola indicates that before investing, you need to get rid of debt. On the other side, the savings percentage is very important, because it can be used for investment or even can be used to help in case you run out of income. “It is recommended to start with 10%, but if you are single, live with your parents and work, it is possible to save 20% or 30%; If you are in an economic crisis and have debts, the value can be corrected by up to 5%, it is important to always set aside the value for savings”, explains Mortola.

Personal finance: What is consumption and what is investment?

How to get out of debt

Stop using your credit cards. Even if you have more than one credit card, it’s better not to have them close at hand for long periods of time. If you can’t indulge so much anymore, keep just one in your wallet.

Don’t let the debt keep growing. Continuing to pay “whatever you can” is not a good decision, as the unpaid amount continues to generate interest and consequences for your finances.

War economy. The goal should be to pay off the debt. For this, it is necessary to adjust the family or personal budget to the maximum expression. You can start with the smallest debt and apply the snowball method. The snowball method consists of arranging debts from smallest to largest. The idea is that you pay the minimum on all of them each month, and put any extra money you have towards the smallest debt.

By creating a savings fund, you can face the costs of studying abroad

How to properly manage salary?

Create a budget prioritizing essential expenses. “Pay for what matters, food, health, education and housing.”

1. Record the expenses

The first step to start saving is to determine how much you will spend. Track all your expenses; this means every purchase, household item and cash tip. Once you have the information, organize the numbers by category, such as fuel, groceries, and mortgage, and get a total for each. It is important to note that there are unnecessary costs.

2. Savings budget

Once you have an idea of ​​how much you spend each month, you can start organizing the expenses you’ve recorded and determine a budget you can live with. Your budget should give you an idea of ​​how your expenses compare to your income, so you can plan your spending and limit overspending. Be sure to include expenses that occur regularly, but not every month, such as car maintenance.

3. Find ways to reduce your costs.

If your expenses are so high that you can’t save as much as you’d like, it might be time to cut back. Identify non-essential categories where you can spend less.

4. Set savings goals

One of the best ways to save money is to set a goal. Set a small goal. Achieving smaller goals and enjoying the nice reward you’ve saved for can give you a psychological boost that makes the rewarding feeling of saving immediate and the habit stronger.