Learn how to manage your money effectively to start saving and investing for a secure financial future.
We put together a step-by-step plan on how to manage money. We figured out how to accumulate a safety cushion, where to invest spare money, and how to invest in securities. We turned to experts for tips: the head of the editorial board of Tinkoff Investments, the founder of the financial literacy school Fingram, and the director of capital attraction at Arsagera Management Company.
Step 1: How to Start Saving Money
To have free money for savings, it is not the amount of income that is important, but the right financial habits.
Create a personal financial plan
It should include: expenses and income, optimization tools, safety cushion, savings, planned purchases. A common mistake when making a plan for the year is to include monthly expenses and forget about annual ones.
Monthly expenses include rent, utilities, transportation and food, communications, online subscriptions, banking fees, and entertainment. Annual expenses include: vacations, medical checkups, loan and insurance payments, gym memberships, seasonal clothing and footwear, gifts for friends and family on holidays, taxes, and car maintenance.
The sum of annual expenses should be divided by 12 months and added to monthly expenses. Then we analyze the income and compare it with the resulting figure.
For example, Masha is healthy, works for hire, has no car and no loans. She spends 30 thousand rubles a month. Her salary is 60 thousand.
Masha puts aside 10 thousand a month for annual expenses. They include: a subscription to yoga classes, additional medical care, seasonal clothing, gifts for friends. This comes to 120 thousand rubles a year. Masha does not forget about savings: 10% of her salary is 6 thousand rubles.
So, Masha put aside 16 thousand, spent 30 thousand on living in the metropolis. That is, 46 thousand rubles a month is the necessary minimum that covers basic needs. There are 14 thousand left, which can be spent on yourself, entertainment, education or put aside for large purchases.
Start keeping track of your income and expenses
If you think that managing money means first and foremost limiting your expenses and denying yourself everything, then that’s not true. Try simply recording your daily expenses and income. It will take time to train yourself to control your budget. But then you will be able to analyze your expenses and find those that you can give up.
They will help you
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applications Zen-money , Tyazhelovato , CoinKeeper and similar;
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online banking (statements, reports on expenses and receipts, statistics);
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good old Excel;
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a diary of income and expenses. For example, “A Book for Recording Household Expenses for the Year” or “Home Bookkeeping” .
Assemble the airbag
A financial safety cushion provides freedom of action, in case of force majeure it is responsible for psychological comfort. If you are left without work or get sick, the cushion will provide a cash reserve.
Usually, financiers recommend putting aside an amount that will be enough to live on for at least 3-6 months. To understand what amount should be in reserve, multiply the amount of expenses for the month by three. This will give you the necessary minimum. It is better to collect a cushion in a separate savings account. Suitable tools in banking applications are goals and piggy bank.
The most convenient strategy for beginners is to regularly put aside small amounts. George Clason in his book ” The Richest Man in Babylon ” advises leaving 10% of your income monthly. You can gradually increase your contributions.
When the cushion is ready, you can open a long-term deposit for it with the possibility of partial withdrawal. In this case, the interest will not be lost if you want to withdraw money at any time.
If you have loans, divide them into “harmful” and “useful”
To do this, it is worth carefully analyzing the purpose of the loan and the terms of its repayment.
For example, you bought a car on credit just to drive or go to work – this purchase only takes money. From the point of view of financial planning – not the most profitable decision.
The situation is different for a taxi driver or individual entrepreneur who bought a car to transport goods or passengers. In this case, a car loan is a step towards income growth. Such an investment gradually pays off.
Rate your loans by their usefulness — will they improve your well-being in the future or not. For example, a loan for education is “useful” if the knowledge gained leads to a salary increase. Buying a fur coat on credit or a branded handbag is “harmful”. Consider the terms of repayment and the benefit and try to get rid of “harmful” loans as quickly as possible.
What to read on the topic
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“Let’s Talk About Your Income and Expenses” by Carl Richards – tips on how not to lose sight of the main thing when planning your finances.
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” Girl with Money ” by Anastasia Veselko is a guide to taking control of your finances and loving talking about them.
Step 2. How to form capital in a bank
When you don’t have to worry about your safety net, you can start saving for long-term goals. For example, travel, education, large purchases. But first, it’s worth learning more about banking products.
Arm yourself with theory
If you have never delved into the theory of financial management, we recommend spending money on your education: buy books , subscribe to bloggers, listen to podcasts, watch webinars. This way you will better understand the terms and will be able to follow the trends in the development of investment markets.
What to listen to, read and watch about finance
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Tinkoff Investments Team Podcast “Greedy Investor”
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Podcast of the financial literacy school “Fingram”
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Blog of the consultant of the Ministry of Finance project on financial literacy Anastasia Veselko “Finances for girls”
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Free webinars at Moscow Exchange School
Decide on the currency
If you live in Russia, it is better to save up your safety cushion in rubles. Diversification of other savings would not hurt: keep part of the amount in foreign currency, and part in rubles. Experts recommend keeping 50% of funds in rubles, and 25% in dollars and euros.
For a small amount, you can open a multi-currency deposit – this is when there is one agreement with the bank, but the amount is accumulated in three or even five different currencies. It is better to choose a multi-currency deposit with the ability to increase the share of one currency and decrease the share of the second without a commission. Most banks offer such products for clients with capital from 50 thousand rubles.
Choose a deposit that is beneficial for you
For individuals, banks issue: term, savings, savings, demand deposits.
Term deposits usually have the most favorable interest rates. But the conditions here are also the most stringent. For example, it is not profitable to withdraw money in advance: interest is not paid.
Cumulative deposits assume that the client regularly deposits funds into the account. But the interest is not as high as for fixed-term deposits.
An open-ended agreement with the bank is concluded for a demand deposit. You can replenish and withdraw funds at any time, but the interest rate is minimal: from 0.01 to 1.5% in rubles.
A savings deposit differs from a demand deposit by its limited term. The interest rate may fluctuate depending on the balance in the account. You must also inform the bank in advance that you want to withdraw money. There may be other restrictions – each bank has different conditions.
Make your deposit interest work for you
If you regularly put equal amounts of money into a savings account, the main advantage of a multi-year deposit—compound interest—will work for you.
For example, you put 120 thousand rubles in a bank at 5% with interest transferred to a bank card – this will bring 6 thousand rubles per year. And the amount of income, like the deposit, will not change from year to year if you leave the deposit without replenishment. Thus, in five years you will receive 30 thousand rubles in interest.
In the case of compound interest and regular replenishments, the income will be higher, since the interest is regularly (daily, monthly, quarterly – depending on the terms of the agreement) recalculated and added to the deposit body (this is called capitalization), and not transferred to the client’s card for everyday expenses.
For example, you put 120 thousand rubles in a bank at 5%. If you replenish the account by 10 thousand rubles every month, then in five years you will have saved 720 thousand rubles with your labor, and the income from compound interest with monthly capitalization will be more than 114 thousand rubles. That is, hiding your earnings in a home safe is unprofitable, since the difference between 720 and 834 thousand rubles is significant.
For regular replenishment and the possibility of withdrawal without losses, savings deposits are the most suitable, but when signing the agreement, carefully read the terms. The advertised increased rates in some situations may turn out to be zero.
This is important! If the bank closes, the state will compensate for the damage, but for individuals the compensation limit is 1.4 million rubles (up to 10 million rubles under special circumstances ).
What to read on the topic
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“Your Money or Your Life?” by Vicki Robin and Joe Domingo is a guide to financial independence in nine steps.
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“Principles” by Ray Dalio – the rules of life of the American billionaire, who is called the Steve Jobs of investing.
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“The Richest Man in Babylon” by J. Clason – parables that list the main laws of the financial world.
Step 3. Where to invest free money
On the Internet you can find many pseudo-useful advertising sites with tempting but dangerous offers for investments. Remember that it is always better to contact official sources. For example, the sites of certified brokers or the Moscow Exchange, portals of banks or companies that issue securities.
Learn the stock market
For many Russians, investing in real estate or business is unavailable due to high entry thresholds (from $50,000), so it is worth studying the possibilities of the stock market first. Five thousand rubles will be enough to start investing.
You can buy securities, currency and precious metals on the stock exchange from your smartphone, through a special application – many large banks have them. For example, Tinkoff Bank, Sberbank, Alfa-Bank and VTB.
Mutual investment funds
This is a simple way to invest when you don’t have time to figure out the market yourself. You buy a share (participation interest), and professional investors in the fund invest money in various financial instruments: from shares to real estate. If the value of the share grows, the investor gets rich due to dividends. The income usually exceeds the interest on deposits.
Exchange Traded Mutual Fund
This is a fund whose shares are traded on the stock exchange. The portfolio usually includes reliable shares. For example, the most purchased shares of the Moscow Exchange. The Moscow Exchange Index is a portfolio of shares (from 10 to 50) that reflect the dynamics of the Russian stock market.
There may be some terms that you don’t quite understand in this section. That’s okay. When diving into a topic, follow your interests and be curious. The books and podcasts we recommended will help you understand the basics.
What to read on the topic
” Notes on Investing “, UK “Arsagera” – recommendations on mutual investment funds for beginners and advanced investors.
Choose an investment strategy
There are three main types of investors: conservative, rational and aggressive.
A conservative investor prefers to invest in bonds (about 70% of funds), reliable stocks and ETFs (30%). A rational investor divides the portfolio in half: 50% goes to bonds, and 50% to stocks and ETFs. Professionals conduct an aggressive policy on the stock exchange: about 80% of the portfolio is stocks of new high-tech companies, securities of emerging markets and other investments with high risks and returns.
To determine your risk profile and correctly assemble a securities portfolio, think in advance about the goals, terms, and amount of investment. Assess your knowledge and experience of interaction with the exchange. To begin with, you can take a test from Fintolk , Moscow Exchange , or Personal Capital .
If you can forecast your income for a period longer than five years, you can afford to take higher risks. For example, buy more shares on the stock market than bonds. Investing in shares is considered riskier than bonds, but you can also get a higher income from them.
Invest in yourself
Modern employees are prone to vacillation. According to a 2020 survey , every second Russian has radically changed their profession several times, and only a quarter of respondents have worked in the same field their entire lives. Now, maneuvering between different industries is a new reality that requires a proactive approach to self-education and career.