Altroconsumo, how to manage savings with financial planning

To plan savings and better manage consumption during the various stages of life, it is essential to make good financial planning for yourself and for your family. The family budget is the best tool to rely on. Here are Altroconsumo’s advice to make one, even with the help of technology. The first step to start saving is to understand what our needs are, the goals we want to achieve (for example buying a house, taking a vacation, enrolling in a master’s degree) and the life expectations we want to achieve, for us. themselves but also for our family. To do all this it is essential to have good financial planning, which changes according to the various stages of life. In the video, made for the month of Financial Education promoted by the Edufin Committee, we give you some little advice to understand where to start and which are the most useful tools to keep income and expenses under control and start accumulating some small savings. What is savings? Saving is that part of income that is not immediately consumed, but set aside for future purchases or consumption. The spending needs are different depending on the stage of life you are in. Young people have few options for saving: their income is intended to cover consumption related to daily life. In the case of people later in life, on the other hand, the possibilities of saving increase by allowing them to make purchases of durable goods (for example buying a house) or setting aside money for social security purposes. The elderly, who already have accumulated savings, can use it for their purchases as well as to maintain a certain percentage to be allocated to the heirs. The family budget (video) is the basic tool for doing financial planning. It is used to keep periodic income and expenses under control: in this way, every month you can save. The family budget consists of: income, such as salary, pension, investment income, donations, an inheritance received; outgoings, that is, the various types of expenses that occur in a month such as food, medical, household, car, travel, study; savings, i.e. the difference between income and expenses. To do financial planning in the best possible way, however, it is also important to know how and how much has been spent. Within the budget it is good that there is a grid in which it is possible to indicate for each specific category of expenditure (for example gasoline, supermarket, pharmacy) the monthly or annual amount and then calculate the percentage compared to the total monthly expenses or yearly. Technology can help you manage your family budget well. In particular, there are applications of payment institutions and banks that automatically allow you to keep a family budget, marking the various expenses and thus trying to save to achieve the established objectives. The types of expenditure. Two broad categories of expenditure can be identified in the family budget. Essential expenses, that is, expenses that we cannot do without. For example, the mortgage payment, rent, bills, food costs, transport costs, health costs, clothing costs. The superfluous expenses, that is, those expenses that can be done without and which are therefore achievable only if we pay the essential expenses first. These are expenses to pay for movie tickets, restaurant dinners, vacations, the gym, and so on. It is a subjective subdivision that changes from person to person: for some an expense may be essential even if for the majority of people it is a superfluous expense. There is no one-size-fits-all rule. Your best bet is to always try to pay essential expenses first and set aside something for savings. There are also rules for distributing expenses and savings over the course of the month. The best known is that of 50-30-20: every month 50% of the income goes to essential expenses, 30% to superfluous expenses and 20% to savings. Expenditure objectives and family budget – When we have a particular goal to achieve (for example a vacation or a master’s degree) we need to work on the various spending components of the family budget to reduce them. · You can work on unnecessary expenses: for example, we could give up a few outings to the cinema or restaurant. You can work on saving by setting aside less in our savings account. You can work on some aspects of essential expenses. For example, we could find an electricity supplier or a bank for our current account that makes us save something or even make a subrogation of our mortgage to reduce the monthly payment. Or choose the most convenient supermarket for our weekly shopping. By using the leverage of mobility and competition, essential expenses can also be reduced. You have to compare to choose products and services and then you have to repeat these comparisons over time: if you find something better then you will need to change. Grow your savings safely. Everyone would like their savings to grow faster. One way could be to use investments. Here are some tips to try to avoid making too risky moves. There is a direct relationship between risk and return: there are no investments that make a lot and have low risk. Always diversify: do not invest all your capital in a single stock, it is good to choose products that have different issuers, sectors and maturities to reduce risk and have an adequate return. Take some time to invest, ask for information, compare multiple options and above all choose with confidence having evaluated everything well. Haste is not a good counselor. To invest, always contact an authorized person (you can find them on the Bank of Italy and Consob website). Pension fund (video), how to use it to make your old age more peaceful. Is it really worth having a pension fund these days? The answer can only be yes, because it is necessary to save immediately to avoid an old age in poverty. Here’s how pension funds work and how to manage them correctly. The video with the advice of our expert. With the end of 2021 Quota 100 will no longer be an exercisable option to retire early. Which will be the replacement will be decided with the maneuver that will be launched in the coming months (to date, in fact, there are many hypotheses on the table, but nothing for sure). Certainly it must be said that, whatever it is, the new formula for early retirement will involve a cut in the pension allowance. In fact, to retire early, one must accept a lower pension. However, the problem of having a low pension does not only concern those who decide to leave their jobs early, but everyone. Future pensions will in fact be low, an average estimate speaks of a pension allowance that will be 60% of the last salary received. It means exposing yourself to the risk of having to live an old age with a lower spending capacity or of not being able to cope with unexpected expenses. How can the problem be solved? Starting to save immediately and, above all, as soon as possible. Time is indeed an ally for investments. The more time you have, the less effort is required in terms of savings to be put aside. Given that we need to save and that it is best to do so as soon as possible, where should our retirement savings be invested? In a pension fund. How does a pension fund work – How does an investment in a pension fund take place? Each month the amount paid is invested (your contribution plus, in the case of a closed-end fund, any severance pay and the employer’s contribution) and this means that the month in which the fund’s share is lowest, because the markets they went down, the fund will buy more shares for you, while when the markets go up, the shares bought will be fewer. This way of investing smooths out the ups and downs of the market and makes the performance of your investment more linear, therefore less risky, making it similar, but more profitable, to that of severance pay. It is not just theory. Analyzing the performance of a closed-end pension fund, the severance pay and the value of a saver’s investment in the fund itself, taking into account periodic payments, it emerges that in the years of great crises, 2001 and 2008, the share of the fund per se lost ground and it took years to return to pre-crisis levels, but the overall position in the fund took less time to return to the black – as well as losing much less in downturns in the markets. All this happened without great disturbances. Look at the line that represents the position of the worker in the fund: it is linear like that of the severance pay even if the trend of the fund share itself rises and falls several times. This makes investing in a pension fund more comfortable and reduces worries about your savings to some extent. How to manage a pension fund. If what we have seen above happens automatically and the pension fund is managed independently, you must instead be the one to do a little maintenance on your investments in the fund. A necessary maintenance, which helps you to better manage your savings and further reduce the ups and downs of the market. The strategy to follow is simple: calibrate your investments based on the years until retirement. The more, the better it is to invest in sub-funds with lots of stocks inside. But aren’t stocks risky? Yes, there may be years where your money in the fund is going down, as it is now, but in the long run, stocks are rewarding. Do you remember the stock market crisis of 2007/2008? the shares had also lost 50%, but then within four years they recovered everything and then only gains came. When it comes to equity investments, time is your ally. Later, when you have fewer and fewer years left before retirement, you have to move to sub-funds with fewer and fewer shares and with more and more bonds – following the pattern you find in the table below. When you are no more than three years away from retirement, you will have to move everything you have accumulated in the different sectors into one: the monetary one. Investing in cash is like putting your money in a savings account. If you are close to retirement you no longer have the time factor to bet on to recover the money lost due to a collapse in the markets, so it is good to pull the oars into the boat and consolidate what you earned in the past. In addition, these sub-funds are also guaranteed, meaning they are guaranteed to give you back at least what you have paid – minus the costs of the fund. So, by following this strategy you can answer the question: what should I do with my pension fund? If you are someone who has many years to retire, as we have seen, the time and the way the fund invests are your allies. If you have a few years left before retirement, you must check the sector in which you invest: check with the table which is the most suitable sector for you.