YOU might have been advised by many on how to save and invest money or you might have read books and articles on it. All advices and knowledge will not work, until you start working on it. Some of the tips may sound so simple that you ignore it.
Ashish Parmar, Operation Head of an IT company once told me, “As my income goes up, my expenses also ascend. I have been working since the last 15 years. Today my salary is Rs. 25 lakhs. I don’t understand where my money goes. I have bank loan of Rs. 35 lakhs still to be paid.”
How not to fall in a debt trap
It requires a disciplined approach towards money. If you have not yet started making your personal budget, start it from today onwards. And if you have already started, its time to analyse it as following:
• Categorise your expenses into different expense heads such as food, health, conveyance, entertainment, utilities, clothes, donation, rent, taxes, etc.
• Make a note of other yearly expenses such as tours and travel, education, membership fees, subscriptions, etc.
• Put them at one place and find out how much percentage are you spending on each expense head. You can make a pie or line chart of your expenses for better understanding.
• You may find the most worrisome expense, as you had thought, is only a small part of your total budget. The idea is to save your mind from getting into penny things.
It will be difficult to generalise, what is the right percentage on food, health or rent, etc. because no two family sizes are same. Spending varies by income level. Cost varies from one place to another
And there are many other factors like the type of job, the status in society, etc.
Some of the areas to be given thought for cutting your monthly household expenses are:
Look at how you are using electricity at your home. Turn off lights, personal computer, printer, chargers, etc. when not in use. Start using CFL bulbs, it saves considerable amount of energy. Though costly initially, these have a longer life and contribute to great savings. Use energy efficient appliances.
If you are driving to your work place, you can go for carpooling option with your friends or colleagues. It will save your fuel cost and also the maintenance. It saves the environment too from getting polluted.
Look at mobile and landline telephone bills. Are you using the plan that suits your needs? Check out for options available with other telecom providers to compare.
Before you make any big purchase, ask yourself if you really need it? It is really easy to cut down your expenditure, if you think before you buy. Impulse buying costs you more than needed. You can look around and surf on internet for cheaper options or discounts before buying.
Credit card bills
Keep track of your credit card bills.
We will learn more about credit card and personal taxes next time. Personal budgeting is not complete without tax planning.
(Jigisha Shah educates youngsters and entrepreneurs on money management)