Budgeting can change your financial life, says BAC Guatemala VP

Juan Maldonado, Vice President of Institutional Relations and Corporate Government at BAC Guatemala, emphasized that budgeting is not a restriction but a tool for achieving financial freedom. He explained that understanding income and expenses gives individuals control, which is essential for developing a savings habit.

Maldonado noted that many Guatemalans struggle to track their finances by month's end due to poor planning. He stressed that budgeting is a skill accessible to everyone, not just accountants. The initial step involves calculating net monthly income. For those with variable incomes, averaging the past six months is recommended.

The next phase involves categorizing expenses into fixed (rent, utilities, insurance) and variable costs. Maldonado highlighted that variable expenses, often termed "gastos hormiga" or "ant expenses," such as unused subscriptions, daily coffees, or food deliveries, are where money is frequently lost. He advised meticulously recording all expenses for a full month using tools like Excel, Google Sheets, or even pen and paper, as this process is often eye-opening.

Maldonado also stressed that savings should be prioritized, not treated as an afterthought. "If you wait for money to be left over to save, you will never save," he stated, advocating for savings to be treated as a fixed expense. He recommended the 50/30/20 rule: 50% for needs, 30% for wants, and 20% for savings and debt repayment. While this proportion can be adjusted, ensuring savings has a guaranteed allocation is key. BAC also encourages individuals to define financial goals, such as paying off debt, building an emergency fund, or saving for a large purchase, before creating their budget.