Personal finance: first steps

Contents · 7 sections

1. Why I closed all my credit cards
2. Budgeting: know where your money goes
3. Savings and an emergency fund
4. Should you keep cash under the mattress?
5. The euro is coming: what to know
6. Where can Bulgarians invest?
7. Keep learning

A few years ago I started paying much more attention to personal finance. The reason was simple: my wife and I started a family, and I was no longer the only person I had to think about. I had to separate business income from personal income and build savings that give security and stability to me and my loved ones.

As someone who has run his own business almost since graduating, for a long time I took from my companies only what I needed to live and reinvested most of the profit. Over time I realised that you also have to pay yourself. In this updated article I share the principles I follow, seen through my experience and the realities of 2025 in Bulgaria: high inflation, low deposit rates and the upcoming switch to the euro.

Why I closed all my credit cards

One of the first things I did was close my credit cards. I used them actively and paid off the balance later. When I started tracking my spending more closely, I saw that every month I paid a noticeable amount in interest and fees. Over a year it added up. My shopping habits did not change, but my bank charges dropped significantly.

I am not saying credit cards are evil. If you always repay in full within the grace period, they can be convenient. But if you often pay interest, it is time to rethink your habits.

Budgeting: know where your money goes

The basic rule of personal finance is to keep spending under control relative to income. So the first step is to analyse all your expenses and decide which ones you really need. Unused TV, streaming, app and gym subscriptions are classic examples of money leaking away unnoticed.

A popular and easy rule of thumb is 50/30/20:

• 50% for needs: housing, bills, food, transport;
• 30% for wants: restaurants, travel, hobbies;
• 20% for savings, investments and paying off debt.

For years I have used the Money Lover app to log income and expenses and see the monthly and yearly picture. Most banking apps now categorise spending automatically, and a simple Excel sheet works too. Your budget should be monthly and yearly, and if you have a family, a family budget as well.

Savings and an emergency fund

As a start, I recommend setting aside 10% to 20% of your income and increasing the share over the years. Your first goal should be an emergency fund covering 3 to 6 months of expenses. It protects you if you lose your job, fall ill or face an unexpected repair, and keeps you away from expensive loans in hard times.

If you have not read it yet, I recommend The Richest Man in Babylon by George S. Clason. Its principles were written almost 100 years ago and are still valid.

Should you keep cash under the mattress?

The most underestimated enemy of savings is inflation. In August 2025 annual inflation in Bulgaria was 5.3% by the national consumer price index (3.5% by the harmonised EU index). In practice, 1,000 leva kept in cash loses around 50 leva of purchasing power in a year.

Deposits do not solve the problem either. According to the Bulgarian National Bank, in August 2025 the average rate on new household term deposits was 0.79% in leva and 1.09% in euro, and practically zero on current accounts. Money in the bank loses 4-5% of its real value every year.

The good news is that bank deposits are guaranteed up to 196,000 leva (100,000 euro) per depositor per bank. They are safe, but they do not grow.

The euro is coming: what to know

On 1 January 2026 Bulgaria adopts the euro at a fixed rate of 1.95583 leva per euro.

• From 8 August 2025 to 8 August 2026 prices must be shown in both leva and euro.
• Accounts and deposits will be converted automatically and free of charge at the official rate, rounded to the cent.
• In January 2026 you can pay in both currencies, and banks will exchange leva free of charge until 30 June 2026.
• The currency risk between the lev and the euro disappears, but remains for savings in dollars and other currencies.

Where can Bulgarians invest?

In my first year at university I learned that one of the key principles of finance is diversification: do not put all your eggs in one basket. The main options available from Bulgaria:

• Government securities: available through banks acting as primary dealers. In March 2025, for example, a three-year issue was placed at a 2.85% yield.
• Exchange-traded funds (ETFs): through a broker you can invest in broad indices with low fees. Gains on shares and ETFs traded on a regulated market in the EU or EEA are tax-exempt.
• Mutual funds: convenient for beginners, but watch the fees.
• Voluntary pension insurance: contributions to the so-called third pillar reduce your taxable income within a 10% limit.
• Gold: a traditional store of value. I wrote about it in detail in Gold investing basics.
• Real estate and crypto: riskier or more capital-intensive options that require more preparation.

Keep learning

My last piece of advice is to invest time in your financial education. The better you understand the principles of personal finance, the more secure you will be. There is plenty of free material online and on YouTube, but be critical of anyone promising quick and guaranteed returns.

This article reflects my personal experience and is not investment advice.