13.10.2021
TECHNIQUES FOR SUCCESS: FIVE FINANCIAL TIPS FOR A CALMER FUTURE
The Bulgarian continues to be the poorest in the European Union, according to data from the European Statistical Office.
On the one hand, we receive the lowest salaries in the EU, both minimum and average. On the other hand, despite the many investment opportunities, most of our compatriots continue to save on deposit, and those who invest directly in stocks or funds (mutual, exchange-traded or savings plans, etc.) are still "a handful of people."
And what better way to accumulate wealth than investing in markets that, historically, grow by more than 8% per year (note: this refers to the average annual return on the S & P500)?
Today we decided to focus on a few tips that would help each of us to significantly improve our financial situation.
Savings
Personal finance experts recommend that we pay ourselves first after we receive a salary. This means that we should set aside a certain part of our income, which is good to be at least 10 percent of what we earn.
Given that your income is higher, you can afford 15 and even 20 percent of them to be saved and even better invested. Here, perhaps, is the place to recall the 50-30-20 rule, ie half of our income should go to housing and food, 30 percent to entertainment and vacations, and 20% to savings.
Investments
The earlier we start investing, the better. In this way, we will make the most of the "eighth wonder of the world - compound interest". Let's say we have saved BGN 1,000, which brings us a 5% annual return. This means that in 12 months we will have BGN 1,050, and in the coming months and years these BGN 50 will also work for us and will earn us money.
Did you know that the same BGN 1,000, invested at 5% annual yield, will represent BGN 2,653 in 20 years? However, the amount can increase to over BGN 42,000 or even BGN 82,000 if we add another BGN 100 or 200 every month. However, if we have 30 years to retire and follow the above examples, then the final amounts will be BGN 83,000 and 163,000.
The rule of 10
Personal finance experts recommend that we be very careful with our purchases. Some of them advise us to sleep before spending more serious amounts, thus protecting ourselves from impulsive purchases. Others are of the opinion that we cannot afford a product if we do not have its value of 10 in savings.
The snowball effect
When you are stuck in various loans, your mission to repay them seems difficult, but not impossible. However, do not focus on repaying the largest debt, but use the method of "snowball". Start with the youngest and in this way each of your victories will inspire you for new successes.
That is, we should first repay our quick loan or credit card debt and then the consumer and mortgage loan. Billionaire Mark Cuban says that the fastest return can be achieved after repaying our credit card debt, as they have between 17 and 22% interest on an annual basis.
In the case of Bulgaria, this rather applies to quick loans, as they have even higher interest rates, often reaching 49%.
Much more important than numbers is the change in your behavior. Once you have repaid some or all of your debts, then you can think about both savings and investments.
Invest in yourself
Today you can find a lot of free and paid courses to enrich your financial culture. If you read personal finance literature, it is quite possible that you will become richer in the future. Courses and books are an easy way to increase our self-worth - through salary, business or investment.
