Spend, Save and Invest Smartly
The boring month of September is over and October is here. Your long wait is over. Another month and another salary. The bad news….There is a long list of things to buy. Those never ending expenses…Then you remember something rather important. For the past few months, your salary has been running out within a few weeks. You are broke much before the end of the month.
You may have a spending problem, which you don’t even know about.
Those mystery spends You make a budget and stick diligently to it, to make ends meet. The problem…You are not able to stick to this budget.
Reason: Mystery Spends.
Its shopping day and you have to buy a new shirt to go with the 7 pants you have. You walk into a garment shop and find the shirt you want. Unfortunately a very beautiful pant has drawn your attention. You leave the garment shop not only purchasing the shirt you planned to buy, but also the pant you did not plan to buy. This is a mystery spend. A mystery spend is the unaccounted spending in your household budget.
If you are young, around 25-30 years of age, earn more than INR 15000 a month and reside in a metro city, then you would indulge in mystery spending. Mystery spending is biggest in this age group. This is the YOLO generation. For those who don’t know what this means…You Only Live Once….Yes….The young in India are losing their money to mystery spending.This could be mindless spending on shopping… There are Smartphone’s, clothes, shoes to buy. Fine dining is the norm these days. Eating out costs a lot of money these days
Then, there are the credit cards….Buy now pay later. You get free money for a period of 50 days. Yes…This is an interest free loan. Credit cards have a one month billing cycle, which is 30 days from the day you buy the goods and an additional 20 days called the grace period. You repay the borrowed amounts within the due date + grace period. You don’t need to pay any interest.
Here’s the catch….What if you don’t repay the borrowed amounts on the credit card in time?
You have to pay interest and a lot of interest on the borrowed amounts on the credit card. You may have to pay a monthly interest rate of 3% and a late payment fee as a penalty. This looks like a small amount, unless you see the big picture… A whopping 36% in interest and late payment fees annually.
Those small expenses
There is a famous saying “A Small leak will sink a great ship”. Beware of those small expenses…. You must have heard of the “Latte Factor”. This is nothing but those small things you buy, which do not seem much at the time, but can be very costly in the long run. Worse…These purchases of unessential items do not add any value to your life. You keep visiting the coffee shop near your office every hour to drink endless cups of coffee. You keep buying chocolate bars whenever you pass the confectionary store. These purchases can seem small at that time, but can be quite a lot in the long run, if you make the purchases daily. Most of your mystery spending is on the small things… Snacks and coffee purchased endlessly throughout the day. This mystery spending keeps you poor and makes sure you stay there.
That shopping list
You head to the grocery shop with your shopping list, to buy what you need. Make sure you buy what you need and not everything you see. If you do not stick to buying what is on your shopping list, you will easily be lead astray. Most of the mystery spends are on unnecessary items. Things you don’t need. This World has several things to buy, and you will be left with no money in your pocket.
Who doesn’t like to party on weekends? Yes…Partying is necessary to get away from the hectic work schedule and boring long working hours. Remember this…Partying is costly and must be done in moderation .Partying, Fine dining and going for movies, is a bulk of mystery spending these days…Especially the unplanned ones… So how do you know how much you are spending on partying and night-outs? Simple…keep a copy of the bills and credit card statements, for a month or two and you will get an accurate picture of how much you are spending, on those parties.
You’re lazy. You will lose money. You need to be on your toes to save and grow your money. Are you in severe credit card debt? Not able to pay the outstanding dues on your credit card? Consider a credit card balance transfer. With this facility you can transfer the outstanding balance from your credit card, to a new credit card, which has a lower rate of interest. It is easier to pay off your credit card dues at a lower rate of interest. You will have to search and find the banks which give you the balance transfer option on the credit card, and pay back your dues. Banks might charge you a processing fee to make use of this facility.
Remember: Hard work pays.
Don’t just save… Invest
Yes… saving is a great idea, but it is investing that pays. You don’t grow rich by saving. You grow rich by investing. Don’t know where to start. Try a recurring deposit. A small amount as less as INR 1000 a month, invested in a recurring deposit is the way out. You will be surprised at how much money you make at the end of the year, through your investments. How you manage your money is up to you. Learn these tricks and manage your money well.