How to adjust your expenses with the credit card and save 10% of your salary in ten steps

The increase in the use of card payments spurred by the coronavirus pandemic and greater hygiene precautions is a reality, but in the face of this growing dynamic, it is convenient to know how to manage the risks that this payment method entails, given its immediacy, easy access and often the distance that it puts between the citizen and the real expense that he assumes with his card.

From the Open University of Catalonia (UOC) they call for caution and spending planning with credit cards. His teacher Elisabet Ruiz-Dotras, who teaches at the Economics and Business Studies, emphasizes the double loss of awareness that this payment method brings: “You do not see the money you spend, nor the packages of the products you buy“.

The expert values ​​a minimum of financial education so that these card payment risks are minimized and problems such as financial stress are avoided because, despite absolute knowledge about the money that is deposited, it is much more difficult to know exactly the money that is spent.

For this reason, Ruiz-Dotras has drawn up a decalogue of commandments to avoid this financial stress, distribute and organize our finances and achieve a perfect balance between the purchases we make with the credit card, cope with mandatory expenses of the whole month and get a determined percentage of savings.

1. Make a financial planning in January that is valid for the whole year. It can be considered as a New Year’s resolution and a kind of reference to use at certain times throughout the year.

2. Periodically carry out a follow-up of that planning carried out in January. Checking if we adjust to what is organized is very useful to verify the effectiveness of the method.

3. Make monthly budgets, something that can be done in parallel to that annual organization and that in practice is a kind of subdivision of that planning that is done in January. Only, in this case, it will be done at the beginning of each month.

4. Divide the monthly income to achieve spending and savings goals, in such a way that the salary is distributed correctly and the credit card is used efficiently.

5. In an ideal scenario, 55% of income should be spent on essential expenses: rent, bills or purchases. The expenditure on rent, indicates Ruiz-Dotras, “should” be between 30 and 35%.

6. Leave 10% for unforeseen expenses and large, more or less expected expenses (summer vacations, Christmas gifts…).

7. 10% of the income can be used for entertainment: lunch or dinner in restaurants, concerts, movie or theater tickets…

8. It is convenient to leave between 10 and 15% of the money to save with long-term views or, failing that, to invest.

9. Between 5 and 10% of the income should be allocated to education or personal training: courses, books, coaching or expenses focused on that objective.

10. Lastly, and as long as it is possible to stick to these previous expenses, 5% could be allocated to an NGO or a group in need.