What variables does BBVA Bconomy have in mind in order to calculate your financial health?
Learn how BBVA Bconomy can calculate your level of financial health
BBVA Bconomy helps you set a saving goal and get it More information
The fact of having a financial cushion in the face of unforeseen events or of meeting your savings objectives can help you live with greater peace of mind. BBVA Bconomy is the new tool developed by BBVA that offers its clients the possibility of having control over their expenses and income in order to improve their savings capacity. For this, the main objective of BBVA Bconomy is to calculate your financial health , or, rather, provide you with the necessary information so you can discover where you could be spending more than normal and in what aspects you could improve.
The four variables that are taken into account in the calculation of your result are: your ability to save monthly, your financial freedom , your rate of effort in paying for housing and your rate of effort in paying your financing and loans . These four variables take into account your income, your savings and your expenses according to the information of your positions in BBVA.
To know better the operation of this calculation, in this article we explain what each variable means and how they are used. Use BBVA Bconomy to calculate your level of financial health!
1. Monthly savings capacity
What you save every month has a big impact on your financial health, however little. These small savings efforts are those that can allow you to gradually build a financial cushion to deal with unforeseen events. Therefore, BBVA Bconomy calculates your savings capacity as one of its main variables.
The monthly savings capacity of a person is calculated by subtracting monthly expenses from monthly income . In order to set standards that constitute a situation considered appropriate for financial health, it is considered that a saving of at least 20% of monthly income per person is the optimal measure of this variable. This percentage is part of what is known as the 50/20/30 rule, popularized by American Senator Elizabeth Warren, in the 2005 book “All your worth.”
For example, if a person has € 1,200 of income per month and € 900 of expenses, their monthly savings capacity will be 25%, a situation that would be considered sufficient to create a mattress, according to the reference parameters.
2. Financial freedom
Financial freedom is the second of the variables included in the calculation of your score in BBVA Bconomy. In a simple way, financial freedom is a measure that can allow you to know how many months you could live without income maintaining the same level of expenses.
To calculate financial freedom, the total balance of the account at the time of calculation and other savings that can be had in investment products, such as funds, deposits, securities accounts, etc., are taken into account.
Having a good financial freedom can allow greater peace of mind in the face of unforeseen events . To cope with your expenses in the event that you stopped having income, most financial planners, like Dave Ramsey (in the book “The Finantial Peace Planner”) or Suze Orman (in “The Road to Wealth”, among other works) considers that the optimal financial freedom would be at least six months.
3. Rate of effort in paying the house
The third of the variables used in BBVA Bconomy is the effort rate to pay for housing, be it mortgage or rent. In order to have good financial health, a person should not allocate more than 40% of their income to the payment of the mortgage or rent, according to Fannie Mae, which is how the National Federal Mortgage Association in the United States is popularly known.
Continuing with the example of the € 1,200 monthly, if this same person has a rent of € 540 per month, this means that he will be allocating 45% of his income to pay for housing. Therefore, this would be a percentage that is estimated above the recommended limit.
With BBVA Bconomy you can compare your expenses and create your financial cushion: find out now
4. Rate of effort in paying financing and loans
The last parameter used to calculate your financial health is the rate of effort you make to pay monthly debts other than those indicated in the previous variable. These debts can include obligations as different as credits, loans, receipts or financed purchases of cards or other concepts. In order to have good financial health, it is recommended not to allocate more than 35% of the income to pay debts. Recommended ratio, in the book “Practicing Financial Planning: For Professionals and CFP Aspirants”, written by two professors of economics at the University of Michigan.
To end the relationship with our example of € 1,200, if this person is returning a loan for studies for which he pays € 240 per month, his rate of effort to pay the debt will be 20%. In this case, therefore, it would be below the recommended maximum.
How variables become a result
Once BBVA Bconomy has all the data that we have explained, the tool converts the results obtained in a number between 0 and 25 , with 25 being the maximum score per variable. When in a specific variable of the four the percentage standards are met, we recommend, and even improve, that variable obtains a score of 25. Once the qualifications of all the variables are estimated, these are summed, resulting in a score of 0 to 100
BBVA Bconomy: learn to save and control your expenses
Having all this information can be a great help to start saving more . BBVA Bconomy can provide you with recommendations so you can improve your financial health.
Now that you know how BBVA Bconomy calculates your level of financial health. We encourage you to observe your level of savings and learn to control your expenses. BBVA Bconomy provides you with the necessary tools to help you meet your savings goals and objectives.