Incomes are not increasing at the same rate as expenses in the last few years. This situation is prevailing not only in India but in nearly every country on earth with the same severity. Hence, you cannot simply think of obtaining a job in a foreign country and lead a worry-free life now, which was definitely possible until about 4 years ago.
The international scenario has changed after the downturn in the U.S. economy began in August 2008. Wherever you go at present, you find significant disparity between income and expenses and it is not restricted to low income groups but to people at all levels. Even those with larger incomes have their own level of expenses like higher rents, costlier vehicles, trendier dresses, etc., which they cannot avoid due to their social status and personal prestige. Under the circumstances, it becomes necessary to manage your income wisely and also provide for savings and investments, if you wish to lead your life with a long-term vision. Mercilessly cutting down on all wasteful expenditure alone is the only way to manage your income and accumulate real savings. The following tips on expense pruning should prove useful to you in prudent income management.
Analyse Your Expenses
Cash shortages occur only when your spending is indiscriminate. The common mistake by majority of us is that we spend our salaries to the last rupee every month, with only a handful of people striving to save something regularly. You require spare cash to save and invest. The only way to generate this excess cash every month is to cut your expenses and avoid all types of indiscriminate spending. If you prepare a list of your monthly expenses for each month and analyse them, you will immediately be able to identify the wasteful expenditures like entertainment expenses, periodical eating out expenses, vacation spending, etc. that can be easily avoided for savings accumulation.
Do Away with Eating Out
Eliminating eating out spending completely or keeping it to the minimum is very crucial, particularly in the context of the exorbitant prices prevailing in hotels and restaurants for food and drink items. A tea costs Rs. 5 and a coffee Rs. 7 even at the cheapest roadside hotels. If you drink two teas or two coffees outside your home every day for 25 days a month, the spending on this comes to Rs. 250 or Rs. 350. If you have the habit of taking your lunch also outside regularly, the cost of a decent meal today is Rs. 50 even in a budget restaurant. If you can avoid this by bringing food from your home, you can save Rs. 1,250 every month. If you take your breakfast and dinner also outside, your monthly eating out expenses will be about Rs. 4,000 or more.
Change to Home Made Food for Substantial Monthly Savings
If you prepare food at home, your food expenses will never exceed Rs. 2,000, even if you prepare lavish foods and drinks. You can save Rs. 2,000 every month, which can be invested in a recurring deposit with an average yield of 6% per annum. At a conservative estimate, if you continue this investment for the next 20 years, you will have a saving of Rs. 9,28,702.20. If you save in yearly recurring deposits and put the annual savings into fixed deposits or other types of investments, your net realisation will easily be in the range of Rs. 15 lakhs after 20 years and incredibly more after 30 or 40 years.
Save on Grocery Purchases
It is also possible to save on monthly grocery bills. If you visit 4-5 grocery stores and also look at online commodity prices to compare rates of grocery items, you will be able to find out how you can save a few rupees on each item. At the end of the month, this will accumulate to Rs. 500 or more, which can be used for regular savings. You should also watch out for discount offers, discount coupons, special price offers, introductory offers, etc., since all of them lead to considerable saving of your hard-earned cash in grocery purchases.
Scrutinise Utility Expenses
It is also possible to cut down our monthly utility bills substantially. A classic example is supplementing your LPG gas stove cooking with Induction Stove cooking or using the electric stove to the maximum. It is my personal experience that a 14 Kg Indane gas cylinder costs Rs. 420 and lasts for 40 days. This is a monthly expense of Rs. 315. On the other hand, cooking everything with an Induction Stove results in an electricity bill of Rs. 115 a month at the maximum, with the average range of electricity bill between Rs. 75 and Rs. 115. Even at the maximum, the monthly saving on cooking is Rs. 200. Usage of CFL lamps, keeping the air conditioner at two degrees higher at around 26oC instead of at 24oC, reducing the use of drier in washing machine by wriggling the water in the clothes manually and hanging them out, etc. result in definite savings of a few hundred rupees every month, which in turn, accumulates into several lakhs over 2-4 decades.
Other utility expenses like number of TV channels, Internet schemes, telephone and mobile phone plans, etc. can also be evaluated carefully to manage your monthly income wisely and save appreciably. You may be subscribing to 200 channels but think about the sizeable number of them that you never watch or watch occasionally only. You can save at least Rs. 100 a month, if you rework your DTH package. Similarly, you can select the best Internet, telephone and mobile plans that cost you less, without being ineffective. A few hours spent on this analysis and reworking of your priorities results in hundred of rupees saved each month.
Conclusion
Other issues like analysing and avoiding credit card payments, online shopping, eliminating impulse buying of items that have very little usage, etc. are also ideal solutions to stretch your monthly income to achieve substantial savings every month. What is required is honest soul-searching on how you spend your money and mercilessly weeding out all unnecessary and wasteful expenses. Kindly feel free to contact us if you have more questions or doubts on this highly important and critical issue relevant to all of us. We will counsel you with further ideas of prudent income management.