Many people wait for the start of 2021 to start implementing changes in their lives, renewing plans and goals, as well as applying what they learned during the year they leave. In the case of 2020, we have certainly had great learnings in all aspects of our lives and there is no better opportunity to start implementing them than in the face of a new year. One of the most important aspects to consider will undoubtedly be the financial one: if something left us in 2020, it was the lesson of how important it is to have an emergency fund, manage money intelligently and in general, protect yourself from the future. Taking this into account, Randall Castillo Ortega, founder of RACO Investment, provides tips that will help you better manage your finances in 2021 and improve your economic outlook.
Don’t just save; start investing. Says Castillo, “Saving is a good habit that we must all develop; however, to protect your money from movements like inflation, having your money simply saved is not enough. Investing basically means that your money will work for you, generating yields while you continue to generate revenue consistently. There are many instruments that you can start with that will fit your possibilities and goals.”
Set financial goals. Review your statements and balance revenue and egress for a quote. This will help you set a realistic goal to invest according to your finances. Ideally, you should consider investing between 10 and 15% of your income, although it’s not an inflexible rule: it can always contribute more, although it’s not desirable for you to invest less than this percentage.
Cut expenses. It’s a tip you apply for every year, but keep remembering it: identify non-essential expenses and eliminate them. Start by canceling unused subscriptions or memberships in online stores or services, and focus your money on what you truly need to do your work and daily life. If due to the pandemic you must work from home, regulate your habits so as not to repeat the ant expenses you had when you went out on the street: buying loose cigars, a coffee and a snack for the trip to work, a craving after lunch, etc.
Build and diversify a portfolio. Adds Castillo, “The key to growing your money and protecting it at the same time is diversification. For example, don’t consider betting everything on a single instrument. A well-diversified portfolio has a good balance between risks and yields, as well as between fixed and variable income. Be sure to research options that are within your ability to evaluate them and see if they’re a good option for you. When in doubt, discuss the options with an investment professional.”
Invest long term. If it’s within your means, always choose long-term investments. As a general rule, the best yields are obtained this way, and also remember that the goal of managing your money correctly is not to have to worry about tomorrow and secure your future. All the money you invest and earn for ten years or more will generate benefits to allow you a quiet withdrawal with minimal inflation impacts.
In addition to these tips, remember not to lose sight of the movement of your money and keep a regular follow-up on it. Castillo adds that “2021 will be a year of recovery and social improvements; however, nothing is written and the future can always change.” By following sound investment advice and implementing some simple planning, you can be better prepared to face any change and adapt, keeping your economy healthy.