With 2022 coming to an end, it’s time to start thinking about New Year’s resolutions. Since the cost of living is rising, it is just as important to list what you are committed to doing in 2023, including what you are not going to do in the year ahead. In this article, we will show you six mistakes you shouldn’t make in the coming year in order to guarantee the health and stability of your personal finances.
Personal finances: 6 mistakes you shouldn’t make in 2023
Table of Contents
Not planning expenses
The first mistake you should avoid is not planning your expenses. If you don’t plan or control your costs, it will be very difficult to manage your family budget well.
Therefore, it is advisable that you make a monthly summary of all your income , such as wages, interest and rents, and all your expenses , whether recurring, such as paying the electricity bill, or sporadic, such as maintaining your car. With this simple exercise, you’ll be able to more easily control the money you spend and have a better perception of where to cut costs, if you need to.
But now you ask, what about those expenses that appear without being counted, such as a car breakdown or some appliance? It is perfectly natural that unexpected expenses can arise at any time, and this is precisely why it is so important to have savings. This brings us to the second mistake to avoid.
Don’t save
Not having savings that you can turn to in the event of an unforeseen event , such as your car breaking down, or even more serious situations such as becoming unemployed, will put you in a very vulnerable position.
In this way, challenge yourself to set aside a percentage of your salary each month to apply to an emergency fund. You should set a value that you feel comfortable with according to your financial situation.
Not monetizing your savings
If you already have the habit of saving, then don’t fall into the third mistake, which is not making the most of your savings. With inflation, money devalues if it is not invested in products with higher profitability.
Term deposits are an investment product that is highly appreciated by the Portuguese, as they have guaranteed capital and liquidity. However, they are not the only option available.
Low-risk solutions also include savings certificates which are, at this time, the best product with a capital guarantee, as interest rates have risen sharply and their yield is linked to the 3-month Euribor.
If you don’t have such a conservative profile, the solution may be through investment funds . Despite not having guaranteed capital, they are more likely to achieve very interesting returns.
In any case, you should not invest all your savings in a single product, especially when dealing with instruments that involve risk. Diversifying investments is the secret.
Not starting to prepare your retirement
With the aging of the population and the very low birth rate, it is very likely that the pension you will be entitled to from Social Security will not be able to maintain the standard of living you are used to. Therefore, it is essential that you start preparing for your retirement now, even if you are still far from retirement age.
There are Retirement Savings Plans (PPR) on the market with and without guaranteed capital. Naturally, products without guaranteed capital are more likely to achieve higher returns. These products are recommended for those who are still far from retirement age, as they have some time to amortize any product depreciation. If you are already close to retirement age, opt for a product with guaranteed capital.
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PPRs also have tax benefits . The values vary depending on your age and the amount applied:
- If you are under 35 years old, you can deduct a maximum of 400 euros from the IRS, provided you apply 2,000 euros in one year;
- If you are between 35 and 50 years old, you can deduct up to 350 euros from the IRS, provided you apply 1,750 euros in one year;
- If you are over 50 years old, you can deduct up to 300 euros from the IRS, provided you apply 1,500 euros in one year.
Use personal loans
If you don’t have savings to face unforeseen circumstances, you may be forced to make the fifth mistake, which is resorting to personal loans.
In addition to the high interest rates on personal loans, which can reach 13% , you must take into account all the costs that you will have to bear in order to take out the credit, such as taxes, commissions, insurance premiums, among others.
make impulse purchases
Last but not least, you should avoid making impulse purchases. How many times have you bought something that you never used just because it was at a good price or on sale? Well, maybe too many times.
By making impulse purchases , you are spending money that, most likely, would be needed to buy what you really need or to invest in savings. So:
- When shopping, always make a list of what you really need. Follow this list to the letter;
- Don’t go shopping when you’re hungry;
- If you find an item at a good price or on sale, think carefully if you really need that product. If you don’t, don’t buy;
- If, when you get home, you regret having bought something, try to return the product to the store as soon as possible.
