January poses a challenge for personal finances due to seasonal expenses and a return to normal income levels after December. Experts advise organizing accounts, prioritizing debts, and starting with small savings to avoid common mistakes. Camila Cárdenas from EY provides practical tips for better management.
January is one of the most challenging months for personal finances, with increases in tuition, transportation, utilities, and rents, while incomes stabilize after December bonuses and payments. This leads to a common mistake: assuming the year-end cash flow continues, prompting unnecessary purchases like clothing or appliances.
Camila Cárdenas, audit staff at EY, explains: "Many people start January assuming that, because it's a new year, it's also time to make new purchases: clothing, appliances, or subscriptions, without considering that incomes are no longer the same." The issue worsens with December credit purchases, leaving January to cover commitments with less available liquidity.
The first step is to organize accounts: review debts, fixed and variable expenses, and automatic payments. Cárdenas warns about excessive credit card use: “Many people pay only the minimum installment, use another card to cover the previous one, and enter a debt spiral where interests keep growing.” Paying basic expenses with credit signals over-indebtedness.
On debts versus saving, if debts exceed 30% or 40% of monthly income, prioritize paying down the principal, not just the minimum, to reduce interest. “If debts exceed a significant part of monthly income, the right thing is to prioritize paying them before starting to save,” she states.
For saving, start with realistic goals: 5% or 10% of income, such as $50,000 to $100,000 monthly with a minimum wage of $2 million. Automate transfers and set aside savings upon receiving income. “The key is to separate savings as soon as the income arrives, not when 'money is left over,'” she notes. Give savings a purpose, like an emergency fund, to maintain discipline. “Saving is a habit, and like any habit, it is built step by step.”
In summary, conduct a real budget diagnosis, pay obligations first, and set small but constant savings, avoiding ant expenses and impulsive credit to ensure an orderly financial year.