Learn to be a superhero of your own economy
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Balancing your finances is an essential part of preparing for life’s unexpected twists and turns, which each of us faces from time to time. It’s worth learning how to prepare so that it becomes a habit. Get started with tips from Hannu Nummiaro, economist at LähiTapiola!
In recent years, many people’s finances have been put to the test. According to a survey of YTK members, they have had to cut back on their own spending and are worried about rising prices.
Hannu Nummiaro , an economist at LähiTapiola, says that even small fluctuations in monthly income can cause problems, regardless of whether you have a low or average income. He encourages people to practise managing their finances and learn about budgeting, balancing and saving.
“You can test your finances by thinking about where you spend your money. A good way is to write down your daily expenses and income or track them using reports from banking apps. It’s also worth noting larger expenses that are less frequent but still regular,” says Nummiaro.
He points out that digitalisation tends to blur the overall picture when money is on debit or credit cards or mobile.
Buffers and diversification bring security
When considering the balance of the economy, it is also important to think about the amount of buffers. In other words, it’s about having assets to fall back on if something unexpected happens. A good start for a buffer is often two or three months’ salary.
It is also useful to consider the diversification of your assets.
“Housing is the largest asset in many Finnish households. Given the volatility of the housing market, it can be wise to save or diversify your wealth,” says Hannu Nummiaro.
He also encourages people to consider where to deposit any money they may have saved.
“Accounts are less likely to yield a return, but you can start regular fund savings with a small amount per month, for example. It’s worth looking at the different options and considering what is the right way to deposit your savings.”
Here’s how to get started with budgeting for your own finances:
- Gather the key data on your finances: income, expenditure, assets and liabilities. This will give you an idea of the limits of your budget and help you understand the impact of unexpected spending or impulse purchases, for example.
- Prepare with a buffer. For example, unemployment, divorce or other unexpected events can affect your income and expenditure. To prepare for life’s unexpected events, it’s a good idea to build up a buffer. A buffer of two to three months is a good contingency for a rainy day.
- Think about what you need in your everyday life. What can you sacrifice if you have to?
- Take care of tomorrow, even during a good upturn. Sometimes the economy can turn unexpectedly, so it’s good to plan for the future even when income levels are rising and you’d be tempted to increase spending.
- eflect, analyse and save. When your income exceeds your expenditure, savings will result. There are many opportunities and options for saving – identify what works for you. For example, saving in a fund is often more profitable than saving in an account and therefore worth considering.
Need more help managing your finances, saving or investing?
As a member of YTK Worklife, you can get the economist’s tips in the OMA+ webinar recordings, which you can find under Webinars and trainings – Recordings – Skills development. Watch the recordings Cornerstones for managing your finances and How to get started in investing!