Consumption and utility

Consumption is the activity in which individuals and families acquire products and services to satisfy their needs and desires.

Consumption refers not only to the products we buy such as clothes, food, furniture and real estate, but also to the so-called intangible consumption, which includes basic services (electricity, water, gas, telephone), and all kinds of activities such as education, entertainment, communications, etc.

In financial terms, utility is used to describe the level of satisfaction achieved by consuming a good or service. It is a subjective value that depends entirely on the habits and expectations of each consumer, since some may feel great utility (satisfaction) when acquiring a small quantity of certain products, while others will need to buy more to achieve the same result.

Saving and investing

Now, as we mentioned at the beginning of this article, in order to have a satisfactory financial balance, the budget should help us achieve a balance between consumption, savings and investment. This means that the most convenient thing to do is to plan consumption in order to be able to set aside savings that will later be invested and generate profits.

Savings should be considered part of our consumption. In such a way that we allocate a constant amount to saving and that it is not generated from the surplus of the budget. The amount will depend on each person, but it is important to be constant and to consider saving as one more item in which we cannot fall behind.

Saving is an excellent financial habit since it allows us to have a fund for emergencies and not to live from day to day. However, the latter alone is not enough to make our money grow; if the objective is to increase our wealth, then investment is necessary, which is the next step after saving, that is to say, we must put the money saved to work so that it does not depreciate and, in the medium and long term, it multiplies.

To invest there are endless options available: some invest in products developed and backed by banks and/or investment companies; others decide to try their luck and skills in the stock market; there are those who buy currencies or metals; still others choose to buy land, commercial premises or real estate; while some prefer to start or expand their own business, buy a franchise, etcetera.

Translated by: A.M