There is none
among our generation, who haven’t received an advice from elders not to spend
money on unwanted items. Also none among us would wantonly wish to spend money.
Indian mind-set is such that, given a choice we would choose to save than
spend. That enunciates the motivation behind ‘big billion’ purchases. Why is it that, despite such saving
mind-set, we observe our wallets keep getting emptied uncontrollably? It is in
this context, individuals can consider below thoughts before spending.
Firstly, understand
the difference between reducing and controlling expenses. Reducing expenses
may be referred to the habit of reducing the quantity or frequency of usage of an
item. Instead of watching four movies a month, one can restrict to two, for
instance. This is tantamount to sacrificing the joy of utility, hence not
recommended. Controlling expenses is the habit of setting a target quantity or
frequency of usage of an item, and aiming to strictly not exceeding the target.
Preparing monthly budgets, keeping track of each expense on a daily basis,
matching targets to actuals are few simple practises to control expenses. Note
that we are referring to quantitative targets. Alternatively, one can keep
targets in rupee terms as well. But, chances of getting influenced by emotional
decisions, impulsive purchases, and salary day confidences are higher. Hence,
it is recommended to control expenses in unitary terms.
Secondly, differentiate
between items that are “need-to-have” and “nice-to-have”. While it is difficult to give
examples, as this purely depends on the social status of an individual, keep in
mind, at any level of status you are in, there will be a set of products that
would not be really essential. Need-to-have
products also, after a level of quantity used, can become nice-to-have.
Thirdly, differentiate between the value of a product
and cost of a product. The smile
on your kid’s face will definitely give you bliss when you buy him a toy. If
the toy’s durability is low, associated accessory costs are high and if your
kid’s excitement is temporary, you know the value
of the product. Compare such value
with the total cost of buying, and
buy the product only if the value is at least equals to its total cost.
Fourthly, differentiate between the planned purchase and impulsive purchase. An impulsive purchase occurs, when you buy a product out of emotional non-resistance. Before entering the shop - even if it is online portal - ensure you have the list of the items, description and quantity you wish to purchase is ready with you. Convince yourself that you will come out of the shop only with the items from that list only, nothing in excess. Remember the fact that a discount sale by a shop, does not necessitate you to possess that product.
In the times
of multiple exposures to persuasion by aggressive marketers at every minute of
a day, self-control is the only way
out to control expenses. Remember, a rupee saved is a rupee earned.
Author is a
Faculty in Finance and a PFP Consultant
Know more
about him:
@ www.facebook.com/followkiran
@ kirankvknet.blogspot.com
@
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