Find out how your income and expenses are linked

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Traditionally, literature and cinema often portray thrifty individuals as unpleasant characters, embodying the archetype of the miser. Everyone thinks of the grumpy Scrooge from A Christmas Carol, but this is far from the reality when it comes to saving. The true focus of saving is about understanding the relationship between our income and expenses, and maintaining healthy finances that are prepared for unexpected events.

Saving isn’t just about setting aside a small amount of money each month or putting some loose change in the jar for that dream trip; it’s a whole philosophy of life. It involves an astute mindset, where one prioritizes the future without forgoing the enjoyment of the present. Saving means resisting the temptation of the unnecessary and fostering a sensible lifestyle, where every euro is significant and serves a larger purpose.

If you've ever felt like you don't know where your money is going, the first step to taking control is to create a detailed monthly budget. Start by listing all your income, such as salaries, rental income, or business profits. Then, categorize your expenses into essential fixed costs like housing, necessary variable expenses such as food, household items, and transportation, and discretionary spending like entertainment or dining out.

This budget will help you clearly see the relationship between your earnings and where your money is going. It’s always a good idea to follow the well-known 50/30/20 rule. This means allocating 50% of your income to fixed expenses and basic needs, such as housing, utilities, and food. No more than 30% should go towards discretionary spending for leisure and entertainment. The remaining 20% should be directed towards savings.

While setting aside 20% of your income for savings may seem ambitious, the key is to prioritize saving over other expenses. You can automatically set aside that 20% into a savings account as soon as you receive your income. To ensure you don't run out of cash, you should treat savings as an essential expense in your budget, not just what's left over at the end of the month.

If you find yourself dealing with unnecessary expenses or overspending in your budget, it's important to closely review your variable and discretionary spending to identify areas where you can cut back. Small savings on purchases, unused subscriptions, spending on whims, and unnecessary impulse buys at the supermarket —all of these add up and can make a difference. We need to pay attention to small expenses—those day-to-day purchases of unplanned products that seem insignificant but can constantly drain your budget. Even minimal, they can be detrimental to your personal finances.

You can also take advantage of digital tools like My Everyday Operations in the BBVA app, which helps you better control your expenses and set savings goals. Remember, saving without a clear purpose can be harder to maintain consistently. That's why having specific savings goals is essential. Whether it's a short-term goal like a vacation or a new couch, a medium-term goal such as buying a car or a house, or a long-term goal like saving for retirement, quantifying and prioritizing these goals will motivate you to save more effectively and allocate your savings more wisely.

Financial apps are indispensable for this. They allow you to categorize and automatically track your transactions, identify spending patterns, create detailed budgets, and even enable automatic savings functions. BBVA offers these features too, with options like rounding up purchases or setting rules to automatically allocate a portion of your paycheck to savings with the Goals Account.

If you find it hard to stay motivated to save, you can turn the experience into a game where you and your family earn points, badges, or rewards that you set and award yourselves for meeting savings goals or reducing specific expenses. As you start achieving these small, short-term goals, saving will become a habit. This will make it easier to stay motivated and maintain a balanced relationship between income and expenses.

An old but effective technique is to use cash envelopes for each expense category. For example, an envelope for groceries, another for gas, and another for entertainment. Once the cash in an envelope is gone, there’s no more spending in that category for the month. This physical and visual method can greatly increase awareness of unnecessary expenses. Additionally, BBVA's 'Piggy Banks' feature can be very useful. It allows you to save from your own account by setting aside a specific amount of money, without needing to open new accounts. To create the section, just give it a name, decide how much money you want to separate and choose the account where you are going to create it.

Also, you can implement regular no-spend days, where you avoid any non-essential purchases for two or three days. This practice encourages finding cost-effective alternatives and strengthens your spending discipline.

We should strive to eliminate any notion that equates saving with being miserly. Instead, it's about having initiative and an open attitude towards smart saving., By doing this, we can look forward to a far happier ending than Scrooge's: the peace of mind that comes from knowing we've safeguarded our dreams.