As is known, the country is in a moment of high inflation, the National Consumer Price Index (INPC) stood at 7.36% at the end of 2021 and had not had that level for more than 20 years.
Additionally, for 2022 an inflation of 4.22% is expected (according to the Survey on the Expectations of Specialists in the Economy of the Private Sector, December 2021), that is, during 2022 inflation will remain above Banxico’s target of 3.0% +/- 1 percent.
How does this fact affect personal finances and financial decisions for 2022? In the first place, it is important to take into account that an INPC at high levels is understood as an acceleration in the loss of purchasing power of money, where it is observed that the income of the population does not adjust at the same speed or at the same rate. level than the other prices. This is reflected in the fact that this month a greater amount of money will be required to buy the same amount of goods and services than in February 2021.
Under this scenario, it becomes important to adjust financial decisions so that they are appropriate to the economic conditions of 2022 in an area that is highly relevant: savings.
The initial step is to make an evaluation of personal savings habits and find out if initially there is an “emergency fund”, if not, forming it will be the priority. According to the ENIF 2018, only 42.9% of adults between 18 and 70 years old could pay with their savings for an economic emergency equal to what they earn in a month. The identification through a budget of the recurring expenses of each month and those occasional or unique expenses that could lead to a saving opportunity, is crucial.
The next step is to protect the purchasing power of savings. There are various options on the market to invest and obtain a return on the money saved according to the various availability needs of these resources and to each investor profile: conservative, for those who opt for greater security, even if the returns are relatively low; moderate, when a partial or low risk can be assumed in order to obtain a better return; and aggressive, when higher returns are sought and higher risks can be taken, including the possibility of losses.
In terms of financial instruments, fixed income instruments ensure a return without compromising the amount saved, one of the most relevant factors to consider when comparing various fixed income instruments (promissory notes, cedes or cetes) is their real return, that is, , the difference between the returns on the asset and inflation. In the case of variable income instruments (shares, derivatives or currencies) the yield estimates are higher, at the cost of a variable and even negative return. Investment funds usually combine both types of assets seeking to balance returns and risk, focusing on moderate to aggressive investors.
In addition to these savings and investment strategies, it is important to mention the wide range of digital tools that are available today on the internet to approach this year’s savings goals, such as planners and financial calculators, mobile banking applications, workshops online financial education, among others. Each of them can help to generate better savings habits, to have better control of personal finances and even to facilitate the comparison or contracting of financial instruments without the need to go to a financial institution, thus saving time and money. more importantly, ensure that money does not lose its purchasing power in the face of high inflation.
*The author is an economist at BBVA Research.