The first complicated task, which looks like a big bite, is swept under the carpet as easily as possible. For many of us, this category also includes finance, which can turn into opaque chaos after many years if we are not paying attention. What and how much do we spend? Where does the money go? What should I set aside and how much? There are so many embarrassing questions that only a fraction of Hungarians know the answer to, if we start with a willingness to save.
Fortunately, the situation is never unavoidable, it only takes a little planning and care to put our finances in order. Why is this so important? Because it is only after an accurate overview that savings can begin when we can determine how much we can set aside for different purposes. Our current post is about getting started with a clean sheet of materials and giving you some helpful tips on how to start saving.
Step 0 to save money
Before we set it aside for any future purpose, let’s get to know our own spending habits! A good plan is based on getting the information you need, so in our case we know when, when and how much we spend. It’s time to systemize our revenue and expenses! Being aware of what we have sacrificed can also give us a sense of where we can carve or what we do not really need. Do we order lunch from a restaurant regularly? It’s cheaper and healthier to cook for ourselves. Do we buy groceries irregularly? Let’s make a shopping list and shop from time to time to really buy only what we need!
Make budgets for each area, such as shopping, entertainment, and hobbies, and try to spend as much as you set for the month. You can use virtually any tool to manage your expenses and budget:
The good old square grid booklet and pencil. Collect the blocks and use them to record the items in a notebook every night.
An Excel spreadsheet is also perfect for this purpose, which makes it relatively easy to calculate where you spend most.
Let’s use our smartphone! There are plenty of budget management apps to choose from that even organize your spending automatically.
With a really clean sheet – settle your debt
Before we start saving, we can take another, very important step to get our finances on track. Credit cards hanging in the air, expensive personal loans, or long-term home loans are throwing a lot of money out the window. After all, the total cost of a loan is not only the amount borrowed: we also pay interest, management fees and other occasional items.
There are several tools we can use to close these contracts. We can prepay or cancel our debt if we can pay off the installment, or even replace our existing loan with a cheaper debt settlement loan. Let’s look at the options:
Prepayment: In addition to the installment payment, we pay off our debt with additional payments. Note that banks may deduct 1.5-2 percent of the prepayment amount in the form of a prepayment fee. For some types of loans, such as consumer-friendly home loans, a prepayment of free home savings Ask your lender how you can get away with this prepayment.
Repayment: This is technically the same as a prepayment, but in the event of a prepayment, we will repay the remaining balance of the loan and cancel the loan agreement. Final repayment is also subject to a fee.
Debt settlement: The essence of redeeming a loan is to pay off your more expensive loan with a cheaper loan. This can lighten our monthly burden, get a higher loan amount, or shorten the maturity, depending on what is appropriate for our goals. Debt settlement is provided by low credit rates. While some years ago we were able to borrow up to 20-30 percent APR (which represents the total cost of the loan), today we can get the same loans for up to 10 percent. The difference can be as high as one hundred thousand forints depending on how much we charge. In the process, we take out this cheaper loan, then pay off the rest of the old expensive loan from the loan taken and close the contract. From there, we only have to pay off the cheaper loan.
Buendía family debt calculator lets you see how much you can win by redeeming your loan!
In Hungary, few people still use the debt settlement option, although they can reduce their monthly installment payments by as much as tens of thousands of forints, which is particularly ideal for credit card debt or overdrafts. These are the loans that are still among the most expensive loans with up to 38 percent APR.
Savings: for what purpose, in what form?
Saving is the focus when we settle our debts and know how much money we can put aside. It is worth setting different goals for this. The function of saving is primarily to preserve the value of our money for a later purpose, and at best to earn interest.
However, we can only expect significant growth in the long run if we carefully invest our money. Perhaps the most practical approach is to think over time and assign savings goals and then the right savings tools.