Earning
This is, perhaps, the most important parameter in terms of finances, since it concerns the income made on a regular basis in each household. This can come either from work or from wealth such as an inheritance, personal savings or investments. Full control of incoming funds, irrespective of whether they are regular or occasional, helps to better manage finances, taking into account your needs, while at the same time giving you an incentive to boost profits through work or investments in savings and/or investment products. In 2022, for example, according to the Hellenic Statistical Authority (ELSTAT) Greek households increased their disposable income by 7.6%, reaching €135.9 billion from €126.3 billion the year before.
Consuming
People consume goods and services to meet their needs and satisfy their desires. Consumption, however, must not exceed income, as needs that are fixed and ongoing must be met first. To make the right choices that will allow us to stay within our budget and better organize our daily lives without stress and anxiety, the required knowledge is necessary. Moreover, smart consumption requires short- and long-term financial planning, collecting information, analysing and defining needs and desires and preparing the appropriate budget.
Saving
According to ELSTAT data, total gross savings in the Greek economy in 2022 increased to €21.8 billion from €16.5 billion in 2021. As a percentage of nominal GDP, this strengthened to 10.6% from 9.1% in 2021, marginally surpassing pre-pandemic levels, but still lower than those of the early 2000s. However, last September the Foundation for Economic & Industrial Research (IOBE) conducted a survey focused on the intention of households to save in the next 12 months. Its findings were rather worrying, with 84% of participants considering themselves unlikely to save, and only 16% possible or very likely. A household's "nest egg" can act as a safety net against unforeseen events or even as a means of enhancing wealth by taking advantage of potential investment opportunities. So in order to determine the optimum level of savings, you need to take into account such factors as income, goals and duration of savings, the level of interest rates and inflation, economic and political stability, and so on.
Getting insured
People who choose not to be insured are tacitly accepting the risk in question along with its financial consequences. Most of the time, however, it turns out that these cannot be covered, leaving any recovery efforts up to the State. Knowledge on private insurance issues, such as the types and scope of coverage, costs and any exclusions allows us to understand the features of insurance plans and, if we so wish, acquire an insurance plan and protect ourselves against a series of risks ranging from loss of income due to illness or accident, loss or damage to property resulting from possible theft, earthquake or fire to general health and life issues.
Investing
Throughout the economic crisis, investment opportunities were limited. Today, however, with the economy growing and interest rates "unstuck" from negative levels, investments are becoming more attractive. A prerequisite, of course, is that interested investors receive appropriate information regarding the products available and understand and accept the level of risk they intend to undertake. Furthermore, if they wish, they can turn to professionals who will provide them with the necessary information regarding any investment decisions. The right investment strategy, moreover, requires both transnational and long-term diversification, implying that investments be made in different countries and markets, and for specific periods, with a view to limiting risk.
Borrowing
Buying a house, equipping a business or acquiring a car for business or non-business reasons are goals that can be achieved instantly, even if the necessary funds are not available. By borrowing – primarily from banks – individuals can buy and use goods and services today and pay for them in the future with the corresponding additional cost (interest). Of course, borrowers must be able to meet the obligations they undertake, so as not to find themselves pressured by financial distress. To this end, borrowers should take into account basic parameters, from the type and amount of the loan to the total amount they will have to pay for its repayment, so that the loan does not develop into a threat to their financial well-being.
Donating
Greeks have a strong tradition of giving, with people donating anything from food, clothes and other goods, to their time and work as volunteers. In the words of the Hellenic Financial Literacy Institute, "donating to charities, unions, societies, and other bodies for various noble purposes is not just for those who have lots of money. It’s something we all can and should do, just as we should teach our children from a young age by setting an example for them." Even if you don't believe in Karma, that is, that every action creates a flow of energy, which returns in a similar form, donating is an honourable act of solidarity, which inspires others in the community to follow suit.
Understanding certain economic terms encourages initiatives that will improve our current and, more importantly, our future economic situation. All that is needed is the search for those tools and experts that can spread knowledge and thus contribute to financial literacy, leading us to sustainable solutions and effective choices.
Links:
Hellenic Financial Literacy Institute: https://www.gfli.gr/en/the-circle-of-money/
Hellenic Statistical Authority: https://www.statistics.gr/statistics/eco
IOBE’s Business and Consumer Surveys: https://meatnews.gr/wp-content/uploads/2023/10/BCS_03102023_REP_GR.pdf
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