‘Do it, at the right time’ – is the key to success.

Its weekend, Saturday morning and I am trying to go for a morning jog. I went up to the door and my wife called me up to get the milk. Again went back to the door, removed the milk and kept it in Refrigerator. Eh! Suddenly I realized; I haven't entered previous day's spending in Quicken. I went to my computer and tried to pull back all my expenditures for the previous day. Remembered and entered all of them. Oops! I was already ½ hour late to my morning Jogging. Never mind; I thought; it's after all a weekend morning and doesn't matter if I go a little late. Meanwhile it was the newspaper guy banging at the door. He actually wanted to give an additional supplement for weekend which came in free. Oh! Now that sounded interesting. I sat down a little while to go through the news paper. And the supplement had offers from around the city. Yeah! That sounded interesting to me and I was late for jogging. I was almost 1 ½ Hr. late. And the sun was bright up in the sky. I lost one day of jogging. I somehow convinced myself that its weekend and I can surely cover it up with an evening walk. But it never happened.

This happiness with almost everyone. We know we do have to complete a work by a certain time; but some way or the other; we try to postpone it. Trying to justify with inappropriate justifications. Do you know we can actually overcome this to a greater extent. The solution to this problem varies from person to person; situation to situation and nature of work that has to be done. I'll try to explain you with some more examples.

A good friend of mine; Mike ; has a very good 'Habit' of going for jogging every morning. I meet him in the park and after we jog, we sit aside for a couple of min's discussing things. I asked him how does he manages to come sharp at 6 to the park. No matter what; he is there at the park at 6.00AM. He said, there are many reasons for this. First and foremost is the fact that he sleeps early. This actually helps him get up early as he already would have the required rest. It would become easy for him to wake up. That sounded great. Next was that as soon as he gets up, he said, he takes a warm water bath. That helps him get refreshed. I asked him why would he bathe before jogging. He said it makes him feel afresh and he's ready to take up the next step for jogging. Wow! That sounded great to me. I knew this would surely help me (at least for my morning jogging).

It actually did, next day morning I got up early; and went to jogging without delay. This day I was there at the park waiting for Mike. I thought there could possibly be many such things/ events where we tend to fail just because we are missing the timing. We need to do certain things by time. If missed ; its gone for a toss. How do we overcome from this.

Its easy! actually as easy as ‘Just do it’. I keep myself organized with a calendar which keeps track of all my ‘to-do’ lists. Maintaining a calendar and a to-do list actually helps us a great deal. Seldom we realize the importance of it, but if we do, it just makes life more easier. I use the online calendar from Google which synchs with my PC and mobile device. This helps me be on time for almost everything.

Any personal life experiences related to time management would be of great appreciation. Please do share your views and/or experiences with this.

Healthier economic lifestyle

Failure is the first step to success – we all have already heard / read about it somewhere or the other. We know that each failure to do certain thing can trigger a change in life. We are all humans, no one's perfect. How many of us have a healthier economic lifestyle. Have you ever thought about it? All we might do is just blame the Credit Card Company at the end of the month. It's not the Credit card which is responsible for our sluggish economy. It's us.

Time and again, it's been proven "We are what we repeatedly do, Excellence is therefore not an act but a habit."- as rightly said by Aristotle. Our financial problems may not be because of lack of discipline, less knowledge or even reluctance to do things. This might hail from our habits.

Poor financial habits lead to expected problems which often seems 'un-expected' for us. Like if we aren't saving as much, we might not be left out with as much to save for taxes each financial year. Poor financial practices often lead to profligacy, house full of surplus or not-so-required things. At times this might even lead to unwieldy debts. Less savings or huge Credit Card bills are some of the effects seen because of our poor financial practices.

Fortunately for us, habits can be changed. Not overnight, but surely in a well organized slow and steady way. How do we go about it…

Identify the most affected area of your finances:

Before we go about a change, most important is, we know what actually needs to be changed in order to get you the best results possible. To do this, first identify the 'Account' which is actually is the root cause for this financial mess. Often we find our Credit card account to be listed first. Its because by using a credit card we tend to have possession of items actually by spending Credit Card Company's money; not ours – if you allow me to say so. So we often fall prey to huge Credit Card bills. After all, it's easier to spend other's money to get things first. And when we're asked to repay it back.. that's where the problem actually starts. And we blame the Credit Card company for all the mess.

Once you've identified one account which seems to be causing financial insanity; its time for you to identify the most affected category of over-spending which contributed a bigger pie in this account. Remember, the best way is to identify a category where you have repeatedly spent more money. Here are some of the situations which often tent to affect our finances more than we think they do.

• Impulsive spending
  
• Habit of overspending on Credit Card
  
• No records of what-to-where your money is going.
  
• Buying things until your house is full (then probably search for a new house as the current one might not be sufficient enough to live in and accommodate all the new items purchased every month)
  

You might have different financial lifestyle which is actually causing problems. List all of them.

Track the action which paves the way in your spending:

Identifying the action which precedes this spending. Its simple, just try and capture one action which actually leads you to do the spending. Like, if you have a habit of overspending on your credit card, most likely the action which actually is triggering this is that you might be visiting a bigger Groceries stores which tend to advertise more items than the one's which are used daily. Or maybe you are visiting a Groceries stores quiet often, maybe thrice a week. We do have a action which leads our habits. A simple example is, we all brush our teeth after we wake up in the morning. So waking up is the 'trigger' to brushing the teeth. Similarly having a tea is triggered by completing our meal. On and on.. try to identify the appropriate cause for your un-healthy spending habits. Financial habits differ from person to person, maybe you might do to an online stores and then purchase an unwanted gadget. Write all the possible action which has triggered un-healthy habits.

Get a replacement:

Now its time to find a better habit to replace the existing one. If you do not replace it, your trigger would compel you to go back to the glory days. So try identifying a healthier replacement for your un-healthy financial habit. Some of the better habits which might help you are as below.

• Change your course of action, try reading books.
  
• Writing blogs
  
• Watching a movie
  
• Listening to songs
  
• Purchase only if you have money right now to pay for. DO NOT GO ON CREDIT.
  
• Pay your bills immediately.
  
• Track your spending each day, or on a weekly basis to know where you stand.
  

Once you have identified a replacement to your existing bad financial habit, its time to put things to action.

Get the ball rolling:

Now that you have identified your bad habits, known the actions which tend to trigger these habits and have a couple of new Healthier options available. It's time to put things to action. Each time you know you have a trigger for bad habits, like going to groceries store. Try to get the replaced new habit in place of the old one. May be you have chosen to keep your credit card back home to avoid un-necessary credit purchases. Your well maintained cash on hand would be just enough for you to get your weekly groceries. Now take a week's challenge. Try and avoid your old habits, rather replace them inevitably with the new one's you've chosen. Do it for a week, then try extending it to a month. Here are some of the tips which would make you stick to your new habits.

• Do not allow yourself to get back to the old ones. If you are with friends which have the same old habit which you do, try avoiding them for a while until you are better off.
  
• Make it one at a time. Just because you have identified all the un-healthy habits does not mean you have all of them rolling together. Do it one at a time. Concentrate on what you are doing once you've crossed 30 – 40 days you know where you stand. Then you can try concentrating on a second habit of yours.
  
• Increase gradually. Its not this easy, you might even do hard for a month then return back as you have compelled yourself from staying away from old habits. Do not compel yourself, let it be easy on you so that you won't get bored on it easily.
  
• Publicize what you are doing. Not to everyone, but at least to your family, so that they know what you are working on and hence won't unintentionally drag you away from your goals.
  

Its not easy, but not impossible as well. There is every possibility you can change your spending habits and replace them with new better, healthier financial habits. Try sharing your experiences in the comments so that others can get help from it.

Am I an impetuous buyer?

Its weekend and it is party time for all the hard work we've been doing all week. We like to enjoy in our own way. Some people find evening party a way to relax, while others cook good food at home; some like to get a movie and watch at home, while yet others would love to sleep. For me, weekend is a shopping time. I love buying things. Early Saturday morning, I wake up and get the news paper to know what's going on in the city. And then I find myself busy reading offers from around the city. From groceries to eatables; clothes to electronic items, fixtures to furniture… I see it all. I love going out for shopping.

A friend of mine lives near my house. I have seen him interested in shopping too. Lucky me! or maybe not. I asked him what, where, and stuff. We exchange our views about different shopping malls, offers and also the quality of things available there. This Saturday, while cleaning my car, He came to me and said: "Hey! There's this wonderful offer from Home Town." This offer he spoke about was for a new Air Conditioner. The whole week he was complaining about his A/c not working. He called the technicians and found all he had to do is Gas up the A/c as it was only used last summer.

Home Town has slashed their A/c prices to about 15%. And that seemed to have engrossed him. He asked my views. I enquired how much would it take to Gas up his existing A/c. According to the technician, he said, would cost him around Rs. 2500 to 3000/-. And the new A/c would cost him anywhere between Rs.20,000/- to 25,000/-. Discount would reduce the amount to about 15%, so the actual purchase price would be around 17000 to 21500. Now my answer was obvious, I would ask him to go re-Gas his existing A/c. This would actually save him a huge 14000. After doing the entire math, he comprehend my point in him staying back with the existing one. I was happy I saved him a whooping 14K.

But when it came to me; I started observing how 'Attractive' are these advertisements; seldom realizing if that offer suits our requirements. So friends, here are a few things you might want to ask yourself before you go ahead with any offers.

• Do I Need it, or just want it: Needs and wants are different in nature. Need is something which you cannot do without. And want would be something you could very well stay away, least for a couple of months before want becomes a need. So first thing I would do, is categorize my purchase. I would have to categorize the purchase in Needs or Wants.
  
• Do I already have anything similar that could come close to doing the same thing that I could opt for an upgrade (if Possible): It happens that we tend to buy things that we already have in one form of the other. For example, the a brand new 7 MP Digital Still Camera is no better than my good old 5MP camera integrated in my mobile phone; And specially so, when using my old camera would save me spending additional 5000 to 7000 on a new one. A new offer from a branded Laptop company, and I was getting it for real cheap. It ships in with Intel Core 2 Duo, 3GB Ram, 160GB HDD etc… but my existing Laptop isn't far way back. It's a Intel Centrino Duo, 1GB Ram, 160GB HDD… So I could opt for upgrading its RAM, should I really require to run memory intensive applications.
  
• Can I wait for another month without buying it: This is where you can actually come to know if your purchase is a Need or a want. Try postponing your purchase. I know the offer won't wait for you. But do not worry; there will be another offer soon. Marketing is bound to cut down competition. So, if not from the same company, you can surely expect to have the same or close to the same or if lucky enough, better than the previous offer from a different company. Try to wait and watch.
  
• If I require it now, Is there a way I can exchange my old items and get a rebate: If you feel you really entail that purchase and can't do without. Try exchanging it with old items. Like, if you're going to buy a Plasma TV, try finding out an exchange offer for your good old flat TV. This would surely save you as much as around 3000 to 4000 depending on the condition of the TV set. But if it comes to clothes, indubitably try giving the old clothes to poor people and needy around you. This would be a charity and you can make some more free space for your new clothes. This exchange would not give you money back, but would unquestionably make you feel good for all the charity you've done.
  
• Can I borrow it:- This particularly works out well for borrowing film CD's and DVD's. Instead of purchasing it, you can go borrow from a DVD Shop and need to pay a nominal fee for a day. Or! Maybe if you are going on a vacation, instead of purchasing a Handy Cam, you can try borrowing it with any of your friends. This would surely save you money. And save you more space, as your Handy Cam need not sit inside waiting for your next summer vacation.
  
• Last but not the least, If you feel you really have to buy it, try asking yourself: IS there another offer, possibly from some other Company where I could get a better thing for a little less: Yes! This is always another offer waiting for you, if not publically in the News Paper, try going out in the market to the Authorized Distributors, there these people often have their own margin and can surely give you a discount on their own to promote their shop.
  

So now I have made it a point to ask myself the above questions before I consider going to the Mall and actually seeing things I would like to buy. After all, when I don't see it, it becomes easy for me to forget about it in the next couple of minutes. So friends, do make a habit to ask yourself these questions, and also do share your own experiences here, so that this would helps other visitors to understand, learn and share.

Necessity – A stroke to development

Many of us have heard. Necessity is the Mother of Invention. Yes! It is indeed. But can Necessity ever be a stroke to development~?~ Let's see how and why I feel it actually is.

Tug back my records for September 2008. It was perhaps the most difficult phase of my Personal Finance, So Far. It was the month of difficulties. And this was the month where we often tend to spend a lot. After all, a complete month of regular spending and tapering of Credit card debts.

Well, I was talking about Finances. At first for me, It seemed like over-spending in the previous month. Or the Credit Card (loan, which could have very well been avoided) I owed to my dearest Credit Card Company. But it was actually more than that. It was this month which reminded me of the importance of saving. Yes friends! It was the September deficiency of money which made me think to actually start saving for 'Expected' events.

I started saving for short term expenditures in September. For the month, even though It was hand-to-mouth, I still managed to save. And I'll tell you how.

Previously learnt, and not long implemented was the concept of 'Pay-your-self' which came to my mind. The first 'BILL' for my monthly expenditure now is a transfer from my Checking account to my savings account. The earlier I am done, the better I feel. Saving per month differs from person to person and mainly depends on income and committed expenditures.

But here's a feasible globally used formula. Saving 10% of Net income would help you get geared up for at-least the expected expenditures. If you are unable to meet this, the start with a rock bottom of 5%. And take the advantage of compounding. Here's how.

Say you have started saving Rs.2000/- a month, you can have it increased by 1% per month. That is, 1% of 2000 is Rs.20, and counts to be Rs. 2020/- next month. The following month will again be increased by 1% of the previous month. I.e.; its going to be Rs.2040.20/-. At first this amount seems to be very little. But remember, you've already started saving 10% of your net income.

The main reason for increasing just a meager 1% per month is that it should not be doubled in least in next 2 to 3 years. In fact the maximum saving you make for the month in a stretch of 2 years is just 2600. This way, you'll have a good amount of saving and yet do not have to burn your pocket to save. FYA – you can save as much as around 60,000/- in next 2 years. The case in point is an illustration and can be used to calculate one's own saving. OH! Before I forget, remember if you have more to save for the month, make it as a separate bank transfer and do not combine with the saving BILL. Not to mention, the same, when continued will grow up to a whooping Rs.11,00,000/- in a decade. Its not as bad, taking the fact that you've started with just 2000/month. And the maximum in that case you'd have to pay is around 9500/month in the last few months of completion of your 10 years savings plan.

There's nothing to panic, if for some reason I tend to miss one month of saving. Max I might miss is around 2 thousand. But next month should have the same enthusiasm for saving.

Diet Shopping

Each I go shopping to a Mall. I often always spend over budget. After am back, I check out my bill and it easily goes beyond my expectations or budget. I tried keeping myself away from the mall, that way I have seen over spending for the same item I used to pick up at the mall. Indeed, Shopping Malls do attract us with their great offers. But how do we avail these offers and yet keep our Shopping on a diet.

Let me tell you what. I tried skipping my trip to the mall for a month (after all I used to make only two trips a month). Yet I thought I was successful in saving and stopping myself from spending on un-wanted or un-expected expenditures at the mall. Here's what happened. Rice, which I used to purchase from the Mall was around Rs.24 / KG (well its only 24 when one buys a 25KG pack). The same quality Rice outside was around 31 – 34 /KG. Eh! This is just an example. Imagine what would happen if each of our daily consumables are a few bugs more than what we know we can get them for. That was exactly what happened. But, I was amazed the way this made a great difference. Well Know what? When I tried calculating the price difference from a general stores to that of the Mall, it was around 25% (this added up because of the fact that the less one purchases the more expensive it would be).

But there are positive points to purchasing on a General stores. You can get smaller quantity, but there is often a chance you wouldn't get Groceries the same quality that you might expect from a Shopping Mall.

When I knew it didn't help me much while purchasing from a General Stores, I made up a plan. Before my next visit to the Mall, I have taken a printout of things that I have already purchased (things that we use each month). Now I had a definite list to stick to. Went up shopping, and purchased only things which were good to be taken from the Mall. I had to leave vegetables for my visit to vegetable market. This actually helped.

Shopping in a Mall actually helps, we feel we get reminded of things to be purchased when in the Mall. Yes! We do, but it only becomes sticky when we do not have a list. We just go shopping. That's where we get trapped. We tend to pay for things we might seldom use. Maybe there's a new flavor of Corn-flakes in the market, and we take it for a taste, less realizing that we might already have some left out at home and would not be requiring it for another month.

It is indeed good to go shopping with plastic money. At times you find cash-back offers or even discounts which do certainly counts. Here's where we can use our credit card or preferably a debit card to purchase. I just remember, some of the shopping malls do offer their own branded cash-back cards, where you get back money for every purchase and accumulate it to pay for your shopping expenses.

Buy quality; do not go by the-cheaper-the-best. Well if not, when shopping for clothes and apparels, you go for the best branded t-shirt or trousers. You can opt for a better brand which you know would last for a couple of months – at least. If you are a brand freak, then maybe you could be interested in picking up clothes from 'The Brand Factory'. Haven't personally went shopping but am sure you'd find your kind of brands for as less as it'd allow you to purchase two or three at the price of one.

So, always carry a list when visiting a Shopping mall. This would help.

Understanding your Net worth

Understanding one's financial position (Net Worth) is essentially the first step towards managing personal finances easily.

I started by having Rs.5000 in my savings account, and considered spending through a debit card (plastic money, how could I have missed it!). But then, eventually when I started maintaining my personal finances, I felt the need to have dedicated accounts for different type of spending.

This implies more so to guys who do not have the patience to write down each bit and penny down. This might help you. What I did was as follows:

First, I had to know how much I have. I started by collecting information like the current balance from all my bank accounts. This was painful though but helped me a lot. I had even contacted some of my earlier owned Credit Card company and found out what was the debt I owed. Checked all my savings including Mutual funds, Life Insurance and finally added up all the credits and deducted all loans and/or credits i owed. This has given me my Gross Worth.

Second, I had to adopt a strategy of spending. And wanted to dedicate different bank account for different kind / purpose of spending (saving as well). I am sharing with you the following to let you know how simple it is now for me to manage my accounts.

I had something called Account Group.
Account group is the purpose for which the account was designated. Given below are a few account groups I use.

• Cash Accounts (Checking Account)
• Savings Accounts
• Tax Exempt Savings
• Investment Accounts
• Loan Accounts
• Credit Accounts

The first four account groups are Credit accounts (Which is considered as an asset). The last two account groups are Debt accounts.

Oh! don't you think it becomes simple to manage this way? Well for me it does. Here is a brief description of each account type

Cash Accounts: These are accounts which can be considered for regular (monthly) expenditures. I have mainly two accounts in this, one is Cash On Hand account which is used to track my spending in cash and the other is Checking Bank account which is basically my salary account. This account is used by myself to pay all my bills and house rent etc.

Savings Accounts: I have a few different accounts for different purposes. For me, savings accounts are held in different banks. You may choose to have a single bank and yet have multiple accounts as well. But the reason I choose to have different accounts is the availability of ATM and bank branches. Each account has its own purpose. Like say a savings account in HSBC bank could be exclusively for EMERGENCY fund. which you could use when you have any unexpected expenditures in the middle of the month. But this should not be very easily accessible. The more easy it is to access the Emergency Bank Account through ATM, the more likely you might run the the bank for non-emergency withdrawals.

Tax Exempt Savings: Tax exempt savings account has all types of account which fall under Sec 80C of Income Tax. All Life Insurance accounts, Medical Insurance (if any), Mutual Funds etc. These accounts have a different category because of its nature of savings, you normally get the benefit out of these accounts in a span of say 3 to 10 years. So this money, we know can be re-utilized for a better purpose.

Investment Accounts: DEMAT accounts held in any bank or financial Institutions like India Infoline, ShareKhan etc. These have different time of return, so have a different category. The time of return from these account depends on which time of investor you are or your risk tolerance towards investments. I have a moderate Risk tolerance portfolio and so my returns often in a year or two.

Loan Accounts: These are pure debt accounts that I used to have. These accounts keep reminding me 'Never take any loan next time'. :) So I have this account category but love to keep it empty (or with closed accounts).

Credit Card: You can have these type of account for all your Credit accounts. These accounts with or without our notice are often debt accounts.

The above set of account categories has given me a clear picture of what, how and from where I spend for the next vacation or maybe a visit to the grocery stores.

The Thriftiness Persona

Frugality in Personal finance is one of the aims of this blog. Today I am going to write about thrift budgeting.


It might take just a few Min's to read this blog; but a complete month to actually follow it. No! No! Its not about following my blog posts, its about practicing the few good things which we might know but tend to forget; each day, day after day and so on until you feel a need to have a thrift budget.

I have used Persona, because when it comes to the best Thrift Budget.. everyone has his own views. Most likely because everyone has their own priorities in finances. So it; as always; just remains a persona. But being able to help you get the gist of frugal budget is what is actually aimed at.

There is a lot written on Thrift habits, Frugality, best practices on the net. But I believe, a best practice is the one which can be practiced with ease in real life's at times challenging scenarios.

• Saving - people say its extravagant spending which is most of the time impulsive in nature is what keeps us away from savings. Yes! indeed its true, specially when our spending habits are impulsive. We go out to a Shopping Mall with a fixed need and end up purchasing a few 'Can haves" or even 'good to have' things less realizing the fact that it becomes extravagant.
  
• We keep trying to stick to our budget. Often until the end of the month we find a item which is an eye-catcher. We feel having worked the whole month of budgeting our categories. We are well within the limit and its good to have the new toy back home. Well, at times its not. This actually turns out to be a budget line breaker. Its just one item and you're out of your budget. So try and avoid budget line breakers. This would help you stay healthy on your budget.
  
• Do keep yourself some air to breath from. In order to save we might have everything around us reminding us to same, to keep us within budget. But this does not and should not mean that we eventually forget that we are Earning to live a beautiful life; and not Living to earn.
  
• Buying less expensive, products is not considered thrifty. When we have a budget and can afford it, why not go for a branded item. This could add many years of service saving you time and money to go get the next one in stores.
  
• No one is perfect. not even me; especially when it comes to savings. It is possible and has already happened a couple of times when I willingly forgiven my savings for this month to meet another expense which was more appropriate and demanding then. Does not mean I have stopped saving, I skipped that month and regularised my saving next month.
  

Thriftiness is not Rocket-science, neither it is that simple. All it requires is a balance between time and wants. And I am sure you should be able to practice thriftiness in your own 'Workable' way. Reader's views and/or comments and experiences are most welcome.

Your PC - A Personal Finance Advisor

I am sure many (in fact most) of us do have a Personal Computer back home (well, so far as all of you sure would use a PC to read my blogs). Often we use for emailing, web browsing, Chat etc.. But what if I say your very own PC at home could be your best finance advisor and assistant.


Sounds great! yes! let me explain. Back in 2003 when I first started realizing the importance of personal finances, as you know (from my previous posts) that i used a Personal Dairy. As and how, a month passed, then a year. I knew it was a pain to calculate all the 'hand-written' expenditures. Its then when I first started using my PC for maintaining my personal finances.



I started by a regular excel sheet, which more-sort of a beginner would do. I remember my first excel sheet was something like this.



I had Rows corresponding to each category of spending. --


Apr'03 May'03 June '03 July'03 Aug '03....
Food
Groceries
Dining out
Non-Veg
Veg
Fruits

Transport
Gasoline
Maintenance
Servicing
Road
Train
Flight

Clothing
Accessories

Bills
Mobile
Telephone
Electricity
House Rent

Above table has given me a gist of all my sending categories (on the left) which has its own sub-categories. This is a good way to maintain finances. It gives a better picture of my spending and also if in the middle of the month; if i feel, I've spent more on Dining out there is always time for me to taper the spending and thus helping me keep out of Junk Food.

There is a Personal Finance Spreadsheet available as Family-Budget-Planner. This is available for free download. This sheet gives a pre-formatted, well categorized view of your financial health.

The spread-sheet also records your net-income, sums up your expenditure according to category and gives you a clear picture of whats left out this month. Each months savings are then added to give you a grand total of what you have saved. This is simplest of all, a beautiful, well organized spread-sheet solution.

This spreadsheet given you an overview of your spending patterns. It also can be used for setting aside Budget Projects. "Projects' - what I mean is a budget for monthly income and expenditure. This would give you the idea where you need to cut down your expenditure. Remember, All your expenditures should be less than your net income. This is the only key to 'you' being debt free. It is interesting to make a budget to get out of debt. and fun, if you do not have any debts. As now, I am debt free. Consider your total Net Income is 100%, so Committed expenditures (Wants! Remember) should be around 50%. Needs could be 30% and the rest 20% should be Savings.

Net Income should include all sources of income, including a savings bank interest that we receive every quarter; Spouse income (if any). What it should not include is Investment Returns coming in from may be an LIC policy, Mutual fund, or Shares. These can not be considered in your NET income. For me I have a special category called 'Additional Income' which is variable each month and never fixed. This helps me record each Investment Return I receive.

Committed Expenditures would have all my bills including House rent, paper, servant, water, electricity, Mobile phone, Telephone. Its almost every thing that is fixed and obligatory for me to pay. These expenditures are with everyone. There are two ways of reducing these expenditures.

1. Identify the biggest amongst all of these, most likely being House rent. This can be reduced to almost half of the price if we consider living in a 1BHK house instead of a 2BHK.
   
2. Cut down on every little thing you can; lets say the telephone bill can be reduced by identifying your usage pattern and accordingly opting for a plan which can optimize your usage. Use electricity sparingly, cut down on Mobile phone bills - especially you might want to cut down on your GPRS charges by using your home DSL.

I'd like to speak about Savings before I go to needs. Savings, I consider 'Paying myself'. Its a good strategy to have a mobile phone reminder setup; or you might even like to have an automated electronic transfer system - this is a standing order to your checking bank to transfer amount to your savings back. This way there is no chance of missing out to pay yourself. This should preferably be on the first day of the month. People in India who want to save Income Tax have to save about a max of 1lac. This saving can also be considered in 20% of the cake. After all, these would be coming back to you sooner or later.

Needs are things I would desire to have or possibly things which I can live without for a little while. Some of the expenses which fall under this category are - Dining out, Extra pair of shoes, a unlisted shopping mall visit.. and the list continues.. Its important to control our needs, but more so; to actually fullfill our needs. After all, we earn for our needs.

So a good budget specially with your new 'Personal Finance Advisor' can make your finances more healthy.

Credit Card - A debt builder

Hi Folks, Its been quiet some time now I had posted. Was busy lately in examining something we often tend to ignore.

Hey there, All techies.. Its good to be honored when you work and grow with a company with good repute. We all like (or un-noticeably) accept calls from various Banks/Financial institutions asking us to get a Credit card.

Back in 2006, I presumed owning a Credit card is a prestige issue. Often it is, when we have the so-called Gold Credit Card, Platinum or Titanium. Wow!! Sounds good. Don't you think so?

I had an account with one of the renowned Bank. I was happy-go-lucky with my Debit card in place until one day; a lady from the Credit Card department of the same Bank called me up. She was polite. When she started with "... Good Morning Sir! You are one of a few privileged customers of the bank..." I thought certainly this is the bank which has recognized my long relationship and is now rewarding me with a GOLD Credit Card. I was impressed. And I am sure everyone of us is, specially when we are new and just started our career.

To make things more beautiful, she said "Bank is pleased to select you and reward you with a GOLD Credit card" now who wouldn't be interested. I would. "The process is specially simplified for you, its just one signature and a photo which our executive would require, and you'll get your card by post in just 10 days". 10 days, did I hear it right? A Gold credit card.. I accepted.

Things were good, I was very happy owning a Gold Credit card. After all; it was a age of plastic money. I couldn't have got anything better - I thought.

At first, I started spending small bits on my Credit Card. I used to maintain it well by paying everything the statement showed. Until one day, I decided to get myself a New Nokia mobile phone which was best in the market then and guess what.. A Gold credit card would be the best way to pay for it. I did. Just a day passed and I received a call from the Credit card department. They were happy to see my transaction - I assumed. Yes! Indeed! All they wanted was to make this purchase of mine a simple -no-EMI loan payment conversion. Sounded good, I calculated the amount I needed to pay in 6 EMI's and it totalled up to exactly my mobile phone purchase. I was happy; I asked them to convert this to EMI. Although I had the money and I could have afforded the new Nokia mobile phone. Now here's the catch.

Other transactions were regular on my credit card, just asusual. but with the EMI payment each month, the credit card bill was way too much for me to offord each month. Now I realised, that Credit Card is beilding debt each month for me. And I am bound to pay it; if not, I'll be charged their so called simple finance charges.

Now I knew, each time I spend with a credit card I had a Loan to the end of the month to be paid. It was this simple. Specially so, in my case, it was a Loan for 6 months. That means I can not get rid of the credit card for six months. And if i fail to pay the total outstanding amount for even a single month, i'd have to pay the extra Finance charges.

So Credit card is good, so far we do not use them. Now I prefer my credit card to stay home. I keep it in a safe place and do not carry it with me. Each time I go to the grocery stores, I purchase using my debit card. At least I am happy it wouldn't create a debt at the end of the month.

Well planned budget eases financial breathing

A well financial budget eases financial breathing.

Its not the Rs. 3000 IPod or the trip to Ooty makes difference each month. The expenditures which are unnoticed often make a lot of different. Until lately, I didn't realize that a Rs.2.00 tea at the tea stall thrice a day would make it a surprising Rs.180/month. This is what actually counts and keeps spoiling the dish each month and month by month.

One of my; rather 'un-necessary' spending were - a lunch each day at cafeteria. Though this wouldn't cost me any more than 35 - 40 each day; but it totals to a whooping Rs. 1000 - 1200 per month. Now this counts a lot and am sure is making my money slip from my purse.

How do I save it. What do I do. I kept wondering.

Later I've read a post, rather suggestion by Richard Jenkins at MSN Money. Richard believes in a 60-10-10-10-10 solution. He is of an opinion of dividing monthly gross income as follows.

• 60% -- committed expenses.


• 10% -- irregular expenses.


• 10% -- long term savings / debts


• 10% -- fun money


• 10% -- retirement.

Jenkins believe the best tweak would be to cut down committed expenses.

A beautiful article on How to save enough money, age no bar by Veena Venugopal with Kayezad E. Adajania. I have recomended this article to several friends of mine.

Venugopal, in this article highlites three different types of people when it comes to saving money. He believes what he calls

• Early Birds


• Late Bloomers


• Final Chargers

Early Birds according to Venugopal are people who start savings from the age of 25. He advices Early Birds to start saving 10% of (post-tax) income till the age of 30. Then step up to 20% (from 31 - 40) and 30% (from 41 - 50) and finally 50% in age of 50's till retirement.

This sounds good; but how many of us would be able to achieve this. Starting to save at the age of 25 sometimes itself seems challenging.

Late Bloomers are adviced to start their savings one step forward -- from 30% (30-40) and 40% (age of 41 to 50) and finally 50% when they are 50+.

Final chargers could still have some chance of 40% in 40's and then 50% in 50's.

The key to start saving early is compounding.

Similarly, having a decent and workable budget helps us to achieve savings goals when we're left out of money at the end of the month.

For me, I have different categories for budget. Food, Bills, Gifts given, Transport, Loans etc. Each category is been allotted a specified amount and then a seperate envelop for better understanding of what's left out. Each time I go out to the departmental stores, I know I have groceries on the list and so my 'food' envelop sheds money. Next time I know how much i'm left out with.

Maintaining a seperate envelop for different categories sounds more of a added work. But don't worry. I have a better solution which I started since 2003. coming up in my next blog post.

A Budget need not be a complicated one. Inface the simple it is; the better it is. I would suggest, as I had started categorising my expenditure into three majour categories.

• Essential / Mandatory
• Discretionary (that can be reduced).
• Avoidable.

All Bills would come under essential or commitments like Loan EMI payments, Life insurance premiums to be paid, Income Tax are some of the Mandatory expenditures.

Discretionary would actually be expenditure category which I have to spend; but can actually or dramatically reduce my spending on. The more items in these category the more chance to reduce costs. Like a transportation for me would be discretionary. Similarly Groceries, Fuel charges, Services, House hold supplies are all reducible.

Avoidable are items which I can totally avoid. Like an additional magazine I purchase each month. Dining out. Extra purchases. Its not these extra purchases which make the difference. After all its good for a change we treat ourselves with such luxuries. But problem actually arises when we these luxuries are taken on credit and ultimately we get items which we need to pay in future. Now this is when a luxury become a liability.

Pritty bank

I call it Pritty bank.

We wonder how would we be able to save when we have loads of resposibilities, expected and unexpected expenditures. Some times it seems tough when we put all this together.

Well, the key is.. a Pritty Bank for your 'Expected expenditures'. Now what is this.. its an envelop I have in my living room. the cover of it has a picture of thing i desire to purchase. Its there in my desk (locked). Every day I come back from office, I donate myself for my desires ( Indeed its good specially when we're paid for all the hard work we do at office; daily).

Now the moment this amount reaches 2000/-. I save it in a bank for a target I have .. say 20k.

Its easy when things are enveloped. This is an old money management system quiet often talked about on different blogs and posts I've read. One of which I'd like to share. It talks about the same thing, in a different context all-together. There's a post by Lynn Brem, who talks about a good concept at Take Back your brain. All it talks about are methods of using Marketing strategies as a boost to pursude us to save.

We have always in someway or the other exposed to Marketing strategies. There are advertisements, posters, blog ads, online ads, emails etc which keep us informed or I prefer saying exposed to new items and gadgets. Seldom what we actually realize is it actually introduces a new idea for us. I am sure we have all seen Airtel's adds. The strategy used is simple, it reflects our day-to-day working. where we forget to maybe pay our bills and there we are; advised to pay the bill directly from the phone itself. Now there are two things we need to grasp. One is that we need to pay the bill and so; another option of doing the same. And another; the add repeats itself after every, say 20 mins. Now what! its not a reminder; Its a marketing technique which is used. Repeated visualization of images which would help our brain to learn the whole add. Un-noticingly we start visualizing this even when out or at office.

Now this visualization technique can be well easily used for our so called 'Personal Marketing'. How.. I'll try to put it way simple to understand.

Lets try this. You wanted a new HONDA CITY! Wooh! I'd surely like to have one. Maybe not right now but surely later. Now how do I help myself reach this goal? Simple. The old envelop system. All I need to do is the following.

• Designate an envelop for 'Honda City' (or whatever your dream/aim is).
• Find a beautiful picture of your dream (Honda) and paste it on the cover of envelop.
• I'd add it by adding my own picture and pasting it on the car's picture giving it a visualization of me owing it.
• Now All I do is designate a daily/weekly/monthly amount and accumulate it in the envelop.
• Sure Its not going to be enough for a Honda city. So I choose to sweep in the cash to my back accoun once the amount reaches a specific target.

Great!! There I go. Its that simple.

Take back your brain gives you wonderful ideas of advertising or marketing to yourself like the envelope ad just discribed. It also answeres to queries of people who may ask for better or more personal ideas of teaching oneself.

Honey!! where's my money !!?!!

This was my first question when I'd seen myself in a financial mess.
OfCoz! I knew there was nothing to be worried about, but it wasn't so easy either. My bank savings got eroded quicker than I thought. My pocket seemed getting empty too quickly and I'd find myself running to the ATM for getting more liquidity.All seemed going on the way it was ought to. But end of the day I always used to ask myself "where's my money going?".

Now was the time for myself to set and get prepared for a great financial turn. Or should I call it an operational turn (not exactly a financial one). I started seeking advices online. Many, I never understood. often I heard the terms 'saving', 'invetment', 'leveraging' and 'goals', 'emergencies' etc. So I had decided to get more help of 'HOW?' rather than 'What?'. This quest of saving money had found myself reading several blogs, many websites and posts, problems and solutions to different people world wide with different financial problems. But I always used to search myself and 'my problems' in them. It was difficult though.. But eventually i have learnt a few things about PERSONAL FINANCES MANAGEMENT.

Sounds too personal, yeah! it is. But what I really wanted to know is where is my money going? It was my first and the most important FACTOR in my 'Personal finace management'.

Now was a high time I needed to know the outflow of my money. So, started maintaining a small diary. I used to note down everything I spend in that diary. But end of the month, there was too many pages written and I could not make a gist of it at all. Then I started designating pages for the next month. Something like 'Daily Living', 'Food', 'Bills', 'Clothes', 'Transport'. Now that seems a little good. All i did was enter the date and amount in the appropriate page and total it up in the month end. It was then, I got a broader picture of whats actually going on with my finances.

It gave me an Idea. I have seen my spending habits and came to know that I spend say Rs.2000/- on dining out each month. or Rs.1800/- to fuel up my car. So I started keeping money exclusively for a purpose in my purse. Say I would keep 1700/- in one place and rubber-band it to know that its for dining out. So whenever I go out for dining, I would just open the envolope and see how much is left for the month.

It did help. So the first thing to a successfull 'Personal Finance Management' is the Envolope system. Go ahead, try it.. I'm sure it would be helpful in a way or two.

Comments are welcome.

Welcome~2~Way~2~b~Rich

Welcome friends!

I have always had this dream to become $rIcH$. But how? when I was a kid, someone told me save every penny. I did, until i have 20 to 30 bucks for a pizza or yummy haleem; I would already spend it. Later I realized maybe I should start saving in an Savings bank account. I did, it started to work. I had almost about a 15 - 20k in my account. Then I got attacted to the wonderful world of Investments. (Equity: shares). I thought the best way to double my money would be through shares. I heard people posing they've earned double of what they have invested in amost a few days - a few weeks. Now that was something which I knew i was looking for.

Time passed, in my quest of doubling the money, I always used to invest on a intra-day basis (Day trading). And worst of all, I had this new trick of playing SHORT. Not knowing that short on an intra-day basis is considered a highest risk investment strategy. But as its said, there are always two good thing about past.

• It fades away...


• There is always something to learn from it...

Now, the very intention of writing/maintaining this blog is to help or educate or guide guests (readers) to a better - hard way learnt methods of making/saving money.

Watch out this blog, if you are new to investing or would like to get some real-life savings tips. Maybe you'd be one like me wanting to become rich - slowly.