Friday, January 15, 2010

Monthly Kharcha Pani

At the end of every month you are thinking, where is all my money? Where is it all gone, well boss, your mahine ka kharcha pani takes it all. I have some advice on how to manage your monthly kharcha pani. Here is some good advice I have for you:

1. Money Discipline: Do you have a credit card? Well, if you ask this question to yourself, and if you answered yes, then this is the problem. A credit card can get you into trouble faster than you think. (I think it’s a disgrace to even carry a card which has a ridiculously low credit limit, sometimes its Rs 10,000). I suggest you immediately dispose off your credit card, and get a debit card. All major banks in India can provide you with a debit card, and in fact, there are more debit cards in India than credit cards. A debit card would allow you to live within your means. If you are spending more than your monthly salary in a period of 30 days, then I think you are in serious mental and financial trouble.

2. 50 – 30 – 20 Formula of Spending: spend 50% of your monthly income to satisfy your basic needs. Basic needs are Food, Water and Shelter. The bare minimum you need to exist. This can also include your land line bill, your mobile phone bill monthly rental (not the talk time), newspaper, cable TV, LIC premiums etc. If you have some money left, if at all, use it for savings. School fees for children.

Then 30% of it should go into savings, blindly. Just don’t think, just put this into a some form of savings. In India, there is no social support structure from the government. You have to fend for yourself. The government does provide hospitals etc which charge nominal fees, but the quality and how they behave with patients is lot different. So, in such situations you have to go to a private hospital which can meet your needs. At this time, this 30% of the money will come into play. This would save your soul, literary.

What to do with the remaining 20%: This money you can spend on optional things live shopping for clothes, gifts for relatives and friends, occasional trips to the mall and eating overpriced and expensive dinners. Having ice creams etc. You can also use this money to buy Gold. Gold can satisfy your wife, as ladies generally don’t fall for good food. Give them gold and they would flaunt it around for decades to come. And you end up investing!

3. Keep your lifestyle simple: This is more than what you think. You must be thinking all the online payments systems, the automatic electronic clearings etc would make life easy for you. Well these are innovations of a business where they want more money from you without you knowing how much you are paying. I suggest you go for pre – paid accounts for mobile phones and other daily needs.

4. Large stores are not always cheap: When you shop, compare prices at least three different shops before making a purchase. And three different places means, not inside the same mall, but stores located in different places and different localities. Shops in mall in India are expensive and their stocks are often of substandard quality.

5. Avoid Sales and Discounts: Well, if you are the person who runs for a sale or discount, then just think if you really need that item. I feel that these marketing gimmicks are designed to encourage consumption even if the person doesn’t need it. What’s the use of buying four soaps if one soap lasts for 15 days. Sometimes some sales and discounts are worth it, only if you are aware of how to judge the quality. I suggest evaluating your past experiences with discount shopping. If 60% of the stuff you got on discount is just lying around in the house without being used, then you should evaluate your decision to shop when discounts or sales are going on, after all you can survive without buying that stuff.