Keys to improving your way of spending

This podcast is voiced with the help of Artificial Intelligence tools.

We often think about the possibility of reducing our monthly expenses to create a financial cushion for unexpected events or for life's small and big pleasures. It's important to understand that cutting expenses is a long-term goal that requires patience, perseverance, and time to analyze what we really spend our money on each month. Achieving this will lead to better financial health, which in turn will give us more peace of mind with our finances.

The first step to understanding our money flow is to know the difference between fixed and variable expenses. Fixed expenses occur regularly, and you know in advance when they are due and how much you need to pay, such as with a mortgage or rent. These expenses take up a significant portion of your budget and cannot be avoided, so you need to ensure you have the necessary income to cover them.

Variable expenses, on the other hand, fluctuate regularly, making it harder to determine exact amounts and predict their impact on our finances. However, they are also easier to reduce and, in some cases, even eliminate. That's why they are often the first to be cut during a financial crisis or when income decreases.

In addition to this basic classification, there are three more subtle and seemingly harmless types of expenses that, although minimal, can often be detrimental to personal finances. Colloquially known as small (or "ant") expenses, phantom expenses, and vampire expenses, they tend to be much more common than you might think.

Small expenses are those daily purchases of items that are not planned and don't seem important, but together they can take a considerable portion of our budget. One way to identify them is to list the amount of each one, and at the end of the month, add them all up to see the total expenditure. To keep them from getting out of hand, you can allocate a fixed amount to these types of expenses and stick to it, ensuring you have a balanced budget and avoid any surprises at the end of the month. With the BBVA app, you can easily identify your small expenses and take the necessary steps to improve your monthly spending.

We incur phantom expenses without realizing it, and they end up affecting our finances. For example, this can happen with subscriptions to streaming services or the gym, etc., which are added to the monthly bill without us noticing. In these cases, it’s important to ask ourselves whether these are essential expenses, as this will help us track and optimize our budget by canceling those that aren’t necessary. In the Fixed Expenses section of the BBVA app, you can see at a glance how many subscriptions you have and their total cost, both monthly and annually. You can also simulate how much you would save if you canceled any of them, which will give you a clearer picture of your finances and help you make better financial decisions.

Finally, vampire expenses are fixed costs that are not easily detected because they aren’t included in the budget, even though they can have an even greater impact than the other two. For example, these might include expenses from water leaks or the inefficient use of household appliances, which increase consumption. In these cases, it can be helpful to review energy sources and create a budget that allows us to change our habits to get the most value for our money.

With these concepts in mind, the next step is to create a monthly budget that allows you to accurately see the money you have, the money you spend, and most importantly, whether the former is enough to cover the latter. You can use mobile apps, an Excel spreadsheet, or even a notebook for this. Once you understand how these expenses are distributed in your accounts, you can prioritize them and do your best to save as much of that money that isn't being used effectively. Remember, discipline and planning are essential to achieving this.

At BBVA, we understand that managing your accounts isn't always easy, so we want to help you achieve it. In the BBVA app, you’ll find the ‘Spending Goal’ feature, which allows you to set a budget limit for each type of expense and track it throughout the month. This way, you can ensure your expenses are under control and, if you’re close to exceeding the maximum amount, take the necessary steps to avoid jeopardizing your financial stability.

The BBVA app offers a variety of tools to help you manage your finances. With the ‘Financial Health’ feature, you can access all kinds of information about your finances, which will help you better manage your money and achieve your savings goals.