When we plan to spend money on something, there are always choices. Usually these choices vary on two major factors – cost and quality.
I am sure that most of us need the best quality and end up making a choice with a higher cost. Just think about it – Do you always need the best quality? Can we trade-off on quality-for-cost?
This is a relative question. For instance, you wouldn’t want to trade-off on quality for a food item or health care. But there are instances where you can trade-off for quality – transportation, hotel rooms, things that you rarely use etc.
A typical example would be to choose public transportation, whose quality may be lesser than your car. But this trade-off on quality-for-cost is something that you can manage!!
Share your thoughts on instances where you “don’t need the best” and can afford to trade-off on quality-for-cost.
Photo Credit: espinr
May 2, 2009 Comments
You never make it big by NOT spending your money. Yes, you heard it right!! It is hard to come across a story where someone raised a huge wealth, just by saving the money – cutting down on almost all expenditures. After all – the primary purpose of money is in spending. So what you need to practice is the – Art of Disciplined Spending – to make it big!! I will show you a few of those in this post…
Spend on what you need, NOT what you want
This is the basic mantra of spending, any financial advisor would give you. But, what you need is a very relative term. Your needs may not be same as that of mine – for that matter, not even your spouse’s. Here is a simple way to identify your needs and plan your spending accordingly.
- Track your daily expenses in a small handbook. You don’t need to be specific. For instance all food related expenses can be grouped and marked as – Food –> 25$
- Consolidate your weekly expenses in a Spreadsheet. Spreadsheets are an excellent financial tracking tool (a separate post on this later)
- At the end of a month, analyze all you expenses. Your focus should be – what is the amount spent on each category
- See if there are categories NOT important to you, taking a huge chunk of YOUR money. Instance could be – Movies –> 100$ – that you want but not essential. Try to cut down on this, for the next month
- Just cut down only on 1 or 2 such categories, per month. Don’t try it very hard every time
Spend using the Per-Diem System
Recently, I came across a post in Get Rich Slowly, that talked about the The Per-Diem System of spending money.
Essentially, it is very simple:
- Allocate a fixed sum of money, every month for your spending (this is over and above your recurring expenses)
- Divide it by “4” and arrive at your weekly spending targets
- Only use this money, for all your spending during the month
- If you exhaust the budget, practice frugality for the rest of the month (I am serious here!!)
This is a very disciplined approach and also helps you arrive at your money needs, on month-by-month basis.
Spend only using Cash or your Debit Card
I am always against the use of Credit cards, for anything and everything. Credit cards have gone from being a convenience tool, to money-suckers.
To the maximum extent possible, use your liquid cash for all your spending. Resort to credit card, only if something is essential and you don’t have liquid cash to use.
“30 Day Rule” of Spending
Whenever you plan on buying something costly, try to follow this rule. Many a times, you will find it beneficial.
When you plan to buy a costly stuff – a furniture or a Macbook – wait exactly for the next 30 days. Revisit your plan and see if you still need the stuff. If Yes, go ahead and purchase it. Else, skip the plan
Practicing this rule has helped me saved on many expenditures, which are not very essential.
Many of us have numerous tips and tricks, to manage our spending. I would love if you could share yours, as comments to this post. Also feel free to DM me on Twitter (@thotsunlimited) or mail me ()
Photo Credit: iChaz (Flickr)
April 20, 2009 Comments
- Get rid of Credit Card Debt…. and then the Credit Cards. You would then feel the joy of not having to pay your Credit Card bills every month!!
- Revisit your Mobile, Fixed Line and Broadband plans. If you are in the so-called “Unlimited” plan, find out if you can move into a “limited” plan based on your usage, with a decrease in monthly rentals
- Start Eating at Home more often. If you are married then reduce the frequency of visits to your favorite eatery. If you are unmarried, then learn COOKING! This tip also helps your health concerns
- Look for vehicle pooling options to go to work. If you are driving a 4 wheeler all alone, for say 5 kilometers, it is mandatory that you stop doing it. Look for some colleagues who can join you (or you can join them). In either case, share the fuel expenses, which means more money in your pocket!!
- Revisit your Insurance plans. Insurance plans are wonderful, but you lose more than you gain if you survive the premium period. (I think this is true in majority cases…). If you are paying a hefty premium, try to reduce the Sum Assured (and hence the annual premium) to match your family needs
- Stop buying Books every month and join a Quality Library. If you are like me, grabbing at least 2 books every time you cross the Bookstore, then learn to resist your temptation. A better alternative is to join a quality library in your neighborhood and you would be surprised to find the book expenses reduce by more than half (all without sacrificing your reading habits)
- Pay your bills on time. This is applicable to all your bills and makes sure that you never have to pay the penalties. I use Google Calendar to send me reminders via SMS, to pay my bills. You can use this, if useful
- Transfer a fixed sum to your Savings account, right on Day 1 of the month. Make sure you never touch it for the rest of the month, unless required. The results will speak for themselves!!
- Keep your vehicles in good condition. If required, get it serviced at a quality workshop. It is an investment, to keep your fuel bills under control!
- Switch off electrical appliances at home, when not used. Make sure all unused appliances are switched off (including the power outlet), especially in the nights. This can definitely save a few rupees in your electricity bill
April 18, 2009 Comments