There is less than a month left until 2021 ends and a new year begins, which will come loaded with news for the self-employed, at the fiscal level, Social Security and pensions. In 2022, the group will have to face several cost increases.

Despite this, experts also see this coming year as a great opportunity for the self-employed to start saving, if they haven't already done so, and get a cushion capable of protecting them against possible unforeseen events. Among other things because it is expected that there will be a rebound in economic activity that could be beneficial for business income.

The experts at Fundación MAPFRE offer several recommendations to start saving and a list of mistakes to avoid from 2022 so that, even little by little, the self-employed can create a pocket that allows them to live more slack and be able to weather moments of crisis.

Ten keys for the self-employed to multiply their savings from 2022

1. Start saving as soon as possible and adapt savings to age and income:

The first recommendation seems logical, but it is the most important: start saving as soon as possible. Different studies show that two people who contribute the same capital at the same interest rate in the same plan but with a ten-year offset can obtain a difference of more than 140,000 euros in savings in the final result.

However, there is no fixed savings percentage for everyone. The amount that a self-employed person must separate every month will depend above all on his age and his income, as well as his personal and professional situation and his objectives.

Taking this into account, Fundación MAPFRE recommends that you always have a minimum saving of 10% of your income. In the case of the self-employed, this percentage should be applied to net income. As an estimate, between the ages of 25 and 35, the recommended savings would be 17% of income. From 36 to 65, this percentage of money to set aside would be 15%.

In terms of income, the recommended minimum would continue to be 10% in any case, but it should be raised as benefits increase. Thus, for an income of less than 1,600 euros per month, the ideal savings would be 15%. From 1,600 euros onwards, that percentage should be 17%.

2. Make a solid and realistic budget

The budget is the most effective tool to get the most out of our money. Having a budget allows us to identify where we spend our income and make the necessary adjustments to achieve our goals in the short, medium and long term.

First of all, you have to be careful with the organization of income and expenses, since the self-employed normally use the same account for their business and for their personal expenses. Experts warn that the most advisable thing would be to separate one from the other. This is very important to identify how much money you have and how much you can spend.

Once the accounts are separated, it is time to establish and control as accurately as possible how much is entered and how much is spent. On the other hand, almost more important than income can be expenses. While it is true that what can be saved depends on what is entered, it is also true that the key to saving is always in what is spent.

Once the income and expenses have been identified and separated, they can be divided between the main or fixed ones, those that cannot be avoided and can hardly be cut -such as the payment of the rent of the premises, the rent of the house, or the repayment fee of a loan, of a mortgage- and the secondary ones, which are dispensable and that can be cut. The latter can be divided into two groups: the recurring ones - eating out every day, using a taxi to go to business or having contracted a movie and series platform, the gym, the fuel in the vehicle,...- and the punctual -such as a trip, buying clothes, dining out with friends from time to time, a gift for a wedding...-

3. Build an emergency fund

In the end, saving depends on having an emergency fund, and it's also the way to get there. There are many things that cannot be controlled: the car that breaks down, the boiler that does not work or the washing machine that breaks down.

Regardless of how much you decide to save, experts advise building an emergency fund equal to between three and six months of normal expenses, that is, enough to pay the mortgage or rent and the payment of other loans, food , light, insurance, schools, etc. during this period. The key is to ask yourself what amount saved would give you security and set it as a goal. To do so, it is necessary to have prepared a budget and know the financial health of each one.

@igorbobic I seriously, seriously doubt the integrity of this statement from this representative. No one. Turns down free money. No one.

— Estella Hamilton Thu Jul 22 18:11:04 +0000 2021

4. Pre-save

Pre-save is an automatic savings method that can be set up easily and with which you will save every month without having to do anything else. The trick is very simple and consists of stopping saving at the end of the month and doing it at the beginning. It is what is also known as paying yourself first.

In the same way that the self-employed many of their bills at the beginning of the month, they can also pay themselves. For this you only need:

-Decide how much you want to save each month: The traditional way to do it is by reviewing your expenses and income beforehand. That is, make a small previous budget to know what your current financial situation is. Add your income on one side and subtract your expenses on the other. That would be the amount you can save right now without having to change anything in your lifestyle.

-Decide where you are going to save: you can use a second savings account for that money you save every month or another financial product such as a PIAS, for example. The only really important thing is that this product meets two requirements: that it does not have commissions and that the money can be used when needed.

5. Automate your savings:

One of the most important keys to saving, and especially pre-savings, is to automate saving. In this way, what is achieved is to avoid temptations and that the money is automatically saved in a separate account.

This process is as simple to do as creating a periodic automatic transfer from the account in which you receive the income to the savings account. It is something that will not take you more than two minutes through online banking

6. Cut back on the smallest expenses

In terms of savings, the 'many few' are better than the 'few many'. According to experts, it is more advisable to save little for a long time than to try to save large amounts in short periods of time. This is precisely the thesis from which a book by the writer David Bach is based, called 'Latte Factor', which shows that it is possible to save more than 22,000 euros by avoiding consuming a simple coffee a day. The method can be especially useful in moments as complicated as the current one, in which the self-employed and employees have not yet seen the light at the end of the tunnel and, perhaps, they could not afford large sums to save on a daily basis.

In an infographic, Fundación MAPFRE interactively compiles all the sums of money that would be saved by avoiding a 1.9-euro coffee, depending on how long this method lasts. In just one year, the savings obtained would allow him to buy a next-generation mobile phone valued at almost 700 euros. As the years go by, this same worker who has avoided spending less than two euros a day in a cafe could end up paying for a summer vacation, a luxury sofa, changing the kitchen, paying for a new car or, if he could last 25 years, contribute 22,900 euros to a pension plan to improve your retirement or have a good mattress in case of unforeseen events.

7. Avoid unnecessary debt

To start saving, it is necessary to identify the amount of debt we have, but also its quality. First of all, we must discover if we are in excessive debt. Many experts say that the total of the monthly payments destined to pay debts, that is, the installments and interest of the mortgage and of the other loans, including the credit cards, should not exceed 40% of the monthly income. Others set this limit at 35%.

On the other hand, it is necessary to identify the quality of the debt, since there are some that weigh down finances and make any type of savings unfeasible. Asking for a loan is sometimes unavoidable. However, it is recommended that this loan is always used to acquire a good or service that increases in value over time and, if possible, that it is used to generate income (for example, training expenses or launching of a business) or reduce expenses during the life of the loan (buy the business premises to avoid having to pay rent).

On the contrary, it is necessary to avoid at all costs those loans whose repayment terms are longer than the life of the financed product. For the experts, even worse would be those who have a very high APR; account overdrafts, ATM credits, credit card deferred payments and quick credits.

8. Start investing as soon as possible

According to Fundación MAPFRE's calculations, two people who invest their money in the same product with the same return - of, for example, 8% - can obtain up to 150,000 euros of difference or more just starting to invest at different ages. The key is compound interest.

To illustrate the importance of starting to invest as soon as possible, Fundación MAPFRE proposed an example: Let's imagine a self-employed person who starts investing with his first income at the age of 23. He allocates an initial 1,000 euros to this end and contributes 200 euros a month or 2,400 euros a year. Then, he keeps his savings until he is 33 years old. From then on, he no longer makes contributions, and only leaves the money invested.

A second self-employed person puts the same plan into action but, instead of at 23, at 33 years of age. He also invests 1,000 euros upfront and contributes 2,400 euros more per year. Then, you keep your investment until you retire. In both cases they add up to a return of 8% per year. In the following infographic, Fundación MAPFRE represents the evolution of each person's savings.

What makes the difference in this example is compound interest, which is something as simple as reinvesting the profits the investment generates. The key to compound interest is that the interest generated is added to the initial capital and generates a snowball effect, since interest is applied on the interest itself.

9. Study the available savings and investment tools

The self-employed person, like any worker, is exposed to accidents, illnesses and other circumstances in his family and professional life. However, when running a business, you have to take on a greater risk because, being absent, in many cases, can mean either having to close the blind, or looking for an employee to replace you.

For your protection, in addition to being able to raise your contribution base and take measures to prevent any accident as much as possible, the self-employed have insurance instruments with which they can alleviate this situation. Thus, it is advisable to have compensation insurance in case of temporary disability, since it guarantees a daily amount to the self-employed person who interrupts his work activity due to sick leave or hospitalization, for example.

In addition, there are also plans that ensure the future and that can also be a savings tool in itself. The future public pension can be supplemented with different private social welfare instruments, such as insured pension plans (PPA), or individual systematic savings plans (PIAS), single premiums or investment savings plans

10. Avoid the classic mistakes depending on how old you are

The experts at Fundación MAPFRE compile in various guides the most typical mistakes depending on the age group you are in, and which tend to keep people from their goals saving..

For example, in their twenties and thirties, it is common to think that saving is for later, since leisure plans and options accumulate, which make saving require additional effort, especially for the long term. term. However, "there is no better time to get into the habit of saving than when you are young. There are two reasons: once you do, you will never stop saving and, when you do it when you are young, you don't need to make large outlays to accumulate in the future a good bag", they explain from Fundación MAPFRE.

Also, after the age of 30, it is common to trust everything to the house and to the mortgage, since it is the moment chosen by many people to buy a house. The financial failure in this case is given by the way in which the majority will buy their home: with a long-term mortgage and squandering all their savings in the operation

In addition, at this stage between the ages of 30 and 40, it is common to fall into the spiral of credit card debt, which can be very harmful for savings. Many credit cards today work in revolving mode, whereby you can spend up to a limit and then pay only a small, fixed amount each month. But beware! These types of cards offer a very flexible payment method, but are associated with a very high interest rate.

From the age of 40, a frequent mistake is not having a sufficient financial cushion. A good emergency fund should always evolve as expenses do. While 1,500 euros could be enough at 30, it is no longer enough at 40.

A big mistake at age 50 is to live and invest as if you were in your 20s or 30s. At that age, neither your financial responsibilities nor your situation is the same as when you were 20 or 30 years old.

Of course, it's also a mistake not to have retirement on track yet. Saving is the first step to achieve the goal of enjoying the retirement you want and not the one you can afford. When you cross the 50-year line, you will have 17 years ahead of you until you reach retirement age.