10 simple steps to cut down your spending

Let me tell you how you could get back the controls, by reining in your expenses. However, before I give you tips, you need to read a small story to understand why it is important to keep tabs on your cash outflow.

“I would like to talk to you regarding a home loan”, a nurse told me, when I was in the hospital to visit my wife, who was admitted there. The nurse had come to know that I’m a Financial Planner and had wanted to take my advice about a home loan.

I asked: What investment is she planning to make.

She wanted to buy a room, which would cost her Rs 2.5 lakh, in a suburb that is way out. She wanted to buy that for her two young sons. She has about Rs 1.5 lakh and wanted to know about the home loan for the balance Rs 1 lakh.

I told her: That should be no problem at all. Then, I asked her about her income.

She was earning Rs 5,500 per month and her husband pulled in another Rs 3,500 per month. They were living with her in-laws. She told me she could stretch and pay upto Rs 4,000 per month as EMI. I was deeply impressed. It showed single-mindedness of purpose.

I asked: Why don’t you approach the nearest bank and get going? They will need your payslip to let you know about eligibility amount.

She informed that she and her husband are both temps and don’t get any payslips.

Now, I knew why she wanted to talk to me. It was not that simple a case at all. I suggested personal loans, from the bank with which she is having an account. I cautioned her that they may sanction maybe Rs 50,000 or less, without collateral. With collateral, it may be more, I informed her. She thanked me for my advice.

Here was a woman of limited means, who wanted to buy a home as an investment for her sons and was prepared to save 44 per cent of their income for that. It was simply amazing.

Many of us have that Rs 1 lakh which she wants to borrow, in our savings bank accounts. A lot many spend what she saves in a month on a weekend blowout.

Lots of people also tell me that they are unable to buy a home as they do not have enough money to give upfront. Most who say this, are earning pretty well. The solution here is we have control over expenses. And we need to exercise control, so that we can get our life back on track.

Here are 10 simple steps to get off the “expensive” train -

1. Plan for your goals and invest your money in the correct assets. Take professional help, if needed. Put the investments on auto pilot like a SIP, RD etc. That is what works best for most people. This will ensure that you can spend only the rest.

2. Understand how much you are spending by tracking the expenses. You will be surprised how much you’re spending on the “misc” head.

3. Don’t borrow to spend. Credit card spends ensures that you do precisely that. Use a debit card instead.

4. Buy most provisions for a month at one go. You’ll end up spending less time, effort and money.

5. Do focused shopping. Write out what you want buy, buy that and head for the exit. Don’t take children with you on these occasions. They fill the shopping cart with unwanted fluff.

6. Don’t buy unwanted items or in huge quantity, just because there is some offer.

7. Don’t buy a toy due to your guilt that you are unable to spend enough time with your child. Try and find the time instead. You child wants you, not another toy.

8. Stop spending on that item, once you reach the limit in that month. For instance, if your entertainment allowance for the month is Rs 3,000 and that is spent by the middle of the month, then it needs to be dal-chawal and TV for the rest of the month.

9. Same goes for fuel. Long drives and excursions on weekends are out, once the fuel limit for the month is breached.

10. Don’t switch on the AC by force of habit. Use AC as required. Switch off fans/ lights and other appliances, when no one is around. In many households, TV is on, irrespective of whether someone is watching or otherwise.

Have a bash if there is money left at the end of the month. That gives this exercise a positive spin. Take the family members into confidence as to why you have turned into an Uncle Scrooge. When they learn the larger picture, they will pitch in willingly.

You want to be like that nurse, who was willing to save 44 per cent for a goal? For her it is as difficult to find that Rs 1 lakh as it is to get Rs 50 lakh for us.