Consumption, savings and investment: plan and multiply

February 2026, by Mário Pires

Every month the story repeats: the salary goes into the account and a good portion of it is already accounted for. Housing, food, transportation, telecommunications, holidays… Consumption absorbs a significant portion of our income, and that's natural: this is how we meet our basic needs and maintain our quality of life.

The question that arises is "And what about the future?" How are we going to buy that house with more space for the family or secure an emergency fund and extra money for renovations? These are goals that require planning, time, and discipline. This is where saving and investing come in.

Consumption: necessary, but conscious

Consumption is the immediate use of available income to satisfy needs and wants. It's not a bad thing, but several expenses that seem necessary to us but are, in practice, superfluous, prevent us from saving.

A crucial first step at this stage is to answer three simple questions: How much do I earn? How much does I spend? And within those expenses, what is truly essential? 

A simple budget – created in Excel or in an app – helps make us aware of fixed and variable expenses, but also of dispensable ones, and to find out how much we could save.

Savings: the first step towards future goals

Savings are the part of income that we do not use for consumption, and without savings, there is no investment.

An easy rule to apply is to “pay yourself first”: once essential expenses are covered, set aside a portion of your salary automatically. It doesn't have to be much: Even a 10% or 15% increase makes a difference when applied systematically over time.

Savings typically serve two main purposes:

• Emergency fund - a reserve, ideally equivalent to six months of essential expenses, to cope with unforeseen events, such as unemployment or health problems;
• Medium and long-term goals – to achieve goals related to housing, education, personal projects, or retirement.

However, saving money, by itself, is rarely enough.

The problem of money "sitting" in the bank.

Keeping savings idle in a current account or deposit slip may seem safe, but it carries a silent risk: inflation.

Since deposit interest rates rarely offset rising prices (inflation), money may retain its face value, but it loses real value.. This means that more money will be needed to cover consumer expenses, leaving less for saving and investing. 

Therefore, in practice, leaving money idle for many years usually means gradual impoverishment.

Investment: protecting and growing the real value of savings

Investing consists of applying savings to assets with the potential to generate returns over time. 

Although it involves some risk, this is the main way to increase the likelihood of preserving and growing the real value of money, protecting it from inflation and bringing it closer to future goals.

There are several options – investment funds, stocks, bonds, real estate, among others – with different levels of risk and return opportunities. The key is to understand that risk and return are typically related and that investing should be viewed as a medium- to long-term process. 

A simple financial plan… and SMART

Drawing up a financial plan is the starting point, and it doesn't have to be rocket science. You just need to be SMART:

• Sensible – Clearly define how much you can save each month, both to start investing and to increase your investment over time.
• Measurable – Being able to track what has already been achieved and what still needs to be achieved, without the need to constantly monitor results, thus avoiding emotional decisions.
• Reachable – Set ambitious but realistic goals in light of your income, expenses, and personal circumstances.
• Relevant – To ensure that the defined objectives reflect what is truly important to each individual and their future.
• Temporally defined – Establish a clear time horizon, which helps define the savings and investment strategy and maintains motivation.

Turning this plan into concrete decisions can be challenging. Seeking the help of investment specialists can help translate goals into solutions that are tailored to each individual's risk profile, time horizon, and specific objectives, avoiding hasty decisions or those that are misaligned with what is truly important to achieve in the future.