Reducing your household expenses will result in higher savings, which if invested wisely can provide you a nest egg for unforeseen expenses, children’s education and old age. The saying, “A penny saved is a penny earned” is so true! To plug those avoidable expenses, you need to list out all the expenses during the month to weed out those expenses that you can do without or can reduce. A common monthly household expense list will have some essential expenses and those that can be reduced.
House Rent
If you do not own a house, one major (possibly the largest) monthly expense would be the rent. To save on rent, you can move to a locality where rents are lower. But this may not be a solution for all, taking into account the facilities available in current location and ease and cost of commuting to workplace and the type of neighbourhood at a lower rental.
In this connection, I would recommend leasing a house rather than renting it. I found a decent two bedroom house on a five year lease at ₹10 lakhs lease. The rent of such a house would be at least ₹12000 per month. ₹10 lakhs invested will fetch me around ₹1 lakh per annum max at current interest rates. If I forgo that interest income, I save on rent by ₹44,000 per year!
If you have bought a house availing a housing loan, it may be a good idea to rent it out and continue to get tax benefits. You live in a house with rent lower than whatever income you are receiving from your own house. This will bring down your borrowing cost drastically. If the rented house is closer to your work location, you save fuel cost as well.
Utilities
Electricity charges are revised upwards every so often that it has become one major portion of household expenses. We cannot do without electricity, but can the bill be reduced? My monthly bill used to be in the range of ₹1200. I do not use AC or any other power hungry gadget. I changed all the bulbs to LED at considerable expense, but it had a marginal impact on the bill. Then I came across an advertisement for an exchange scheme for a 5-star refrigerator. I went for the offer and exchanged my old refrigerator. The very next month the bill came down to ₹750! Check your old electronic gadgets and go for a better one. It may be worth it in savings on your electricity bill!
Similarly, I have cut down on non-essential usage of cell phone, and when at home use the BSNL land line using free minutes that comes with the plan.
Food and Groceries
Another major expense head is food and beverages. I found that we were eating out too often and also taking home deliveries of food. These when spent individually item wise do not appear large, but when you total them up for a month, it is a large sum . Monthly expense list definitely gives you an insight into avoidable expense. I am not advocating that you stop eating out, but recommending that you budget for it, and live within your budget.
Another item of expense which can be pruned is consumption of fast foods. Should you have it regularly? Generally fast food, especially meat, contain high levels of saturated fat that cause bad cholesterol. My favourite were fried chicken and Mcdonald’s burgers. Not after my annual medical checkup handed results that indicated my poor state of health. While little bit of such foods do no harm, binge eating definitely harms your health. ‘All you can eat’ buffets also encourage binge eating. Reducing such foods not only improves your physical health, but also your financial health in the long run!
When you do your grocery shopping look for promotional discounts and “buy one, get one free” schemes. Your neighbourhood Kirana shop can be a last resort, as departmental stores offer better value for money on account of bulk deals. Non-perishable FMCG products in larger packs are priced lower than smaller packs. For example a 40gm toothpaste may cost ₹25, whereas a 100 gm toothpaste may cost ₹55. Take these factors into serious consideration to reduce your expense.
Travel & Vacation
I used to fancy going abroad on holidays. Considerable amount of money was spent on such jamborees and the impulse shopping. We hadn’t visited many beautiful places in India yet. Now, we visit places within India and think of going abroad only after we see the lovely places within the country. This patriotism is also pocket-friendly in comparison!
Entertainment
We used to have a DTH connection. I found out that cable TV is much cheaper and one can select the required package. Now, I have changed over to cable and it has indeed saved me some money without sacrificing the entertainment and information quotient. The difference in cost is quite considerable.
Transport
I used to spend quite a lot of money on transport by using my car. I came to know that my company provides free transport. Now, I use this company transport and not only save money but avoid the stress of driving. If your company does not provide transport, you should try car pooling.
Impulse Purchases
Finally, impulse buying is another major source of avoidable expense. Most of the goods bought under this category become unused quite fast as soon as the mood is changed. Clothes, electronic gadgets fall under this category. I bought the Xbox purely on an impulse. I did not think at that time on the recurring expenses and the time one has to spend in playing the box. Now it is given away to a younger relation. The money spent was a total waste. As far as clothes are concerned my wife buys those garments that, she says, “speak to her”. Problem is, they stop speaking to her in a very short time and end up in a corner of the wardrobe!