Checklist

Determine Your Budget

Why it is important:

Knowing your budget helps you narrow down your options and prevents you from overspending. Assessing all costs like purchase price, taxes, fees, maintenance, and travel expenses.

Accumulation of Debt:

Credit Card Debt: Overspending often leads to increased reliance on credit cards. High-interest rates can quickly accumulate, making it difficult to pay off the balance.

Loans: Taking out loans to cover overspending can result in long-term financial commitments that strain your budget.

Impact on Credit Score:

Late Payments:Inability to keep up with payments can result in late fees and negatively impact your credit score.
Credit Utilization:High credit card balances can increase your credit utilization ratio, which is a significant factor in determining your credit score.

Limited Savings:

Emergency Fund: Overspending can prevent you from building or maintaining an emergency fund, leaving you vulnerable to unexpected expenses.

Retirement Savings: It can also hinder your ability to save for retirement, affecting your long-term financial security.

Financial Stress:

Mental Health: The stress of managing debt and financial instability can take a toll on your mental health, leading to anxiety and depression.

Relationships: Financial stress can strain relationships, as disagreements about money are a common cause of tension among couples and families.

Opportunity Cost:

Missed Investments: Money spent on unnecessary purchases could have been invested in assets that appreciate over time, such as stocks, real estate, or education.

Experiences: Overspending on material items might limit your ability to spend on experiences that enrich your life, such as travel, hobbies, or learning opportunities.

Lifestyle Inflation:

Higher Living Costs:As you get used to a more expensive lifestyle, your living costs increase, making it harder to scale back and save money.

Unsustainable Habits: This can lead to unsustainable spending habits that are difficult to break, even when your financial situation demands it.

For Non-Residents vs. Residents:

Residents benefit from lower tax rates and may be eligible for certain deductions. For instance, residents can deduct mortgage interest and maintenance costs from their taxable income, which non-residents cannot. Non-residents from EU countries are taxed at 19%, whereas those from non-EU countries face a 24% tax rate on rental income and other property-related income. Additionally, non-EU residents may face administrative fees up to 1.5% more than EU residents for property transactions. Residents generally pay a property transfer tax (ITP) of 6-10% depending on the region, while non-residents may pay higher. Annual property tax (IBI) is usually 0.4-1.1% of the cadastral value. Wealth tax varies but can be around 0.2-2.5% of net assets.

How to get it done:

Consult with financial advisors, create a detailed budget plan, and evaluate financing options. Suplusnis offers financial consultancy services to help you set a realistic budget.

For Investment:

Ensuring the budget includes costs for potential renovations to increase rental income or resale value.

For Second Home:

Considering seasonal costs like heating (approximately €500-€1000/year) or cooling (approximately €300-€600/year), as well as travel expenses for frequent visits. To save on these costs, consider installing energy-efficient systems like solar panels, which can cost around €5,000-€10,000 but significantly reduce long-term expenses.

For Emigration:

Including living expenses, health insurance, and potential costs for integrating into a new community. General health insurance in Spain can cost between €50-€200 per month for private coverage, depending on the provider and plan. Residents also have access to the public health system, which is highly regarded but may have longer wait times compared to private options.