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.