Theory is all great but let’s look at what you can do practically. Here are 5 tips you can use to cut your expense by 25%. None of these are going to be easy, but none are going to be impossible either. Asses them with an open mind and challenge your comfort zone.
1. Carry a lunch bag
Eating out is usually an expensive proposition. Both from the perspective of money as well as your health. Unfortunately, in our society healthy options are expensive and cheap options are unhealthy (processed foods). But even from a strictly financial point of view, it makes sense to carry your lunch. Your lunch can be as simple as a sandwich with the leftovers from dinner or as elaborate as sushi rolls you make at home. Either way work out the time cost benefit and proceed from there. The cost for producing one of your lunches at home will be marginal at best. Let’s look at what it costs to eat out.
On an average day that I have to eat out a simple fish thali at the average place will cost INR 120-150. Considering 25 working days a month. That’s INR 3,000 a month. Add costs for fuel if you go to different places each day and the time you spend in transporting your mug around. Bring your lunch from home eat healthier and save the 3K each month plus the savings on the fuel. You think 3K is not a lot. That’s 36,000 INR a year. A fair chunk of pocket change.
SAVINGS: 3000 INR a month, 36,000 INR a year
2. Downsize your Car
How much does your car cost you to operate? Well, most people will not even bother. How many of us calculate the cost of ownership? A car costs a shit load of money when you drive it. Fuel is currently at INR 65 a litre. Lets say you’re an excellent driver and achieve a decent 13 kmpl in mixed driving conditions with AC. That works out to INR 5 per kilometre you drive in just fuel. That’s right every 1000 Kms you drive you pay INR 5 K just in fuel. The bigger the car the worse this gets.
But that’s not the end of it. It also costs a shitload of money just to own the damn thing. How you ask?. The Average relatively new, hatchback will cost you close to INR 10K a year to insure. Let’s say a service once a year will set you back approximately INR 5K. Tyres every 4 years will be 20K lets break that down to INR 5 K a year. Not even accounting for depreciation that’s cash out of your pocket, of INR 20K a year.
Plus the money stuck that you’ve “invested” in the car. Lets say 5 L opportunity cost on that itself @10% per annum is INR 50K. And if you financed the vehicle you are in an even bigger hole. Not only are you paying interest on a depreciating asset your if you ever need to liquidate it, it’s a nightmare.
The solution. Well its not perfect. Buy a smaller vehicle and drive judiciously as much as possible. Id go so far as to say switch to cycling or public transport if that’s not an option buy a small motorcycle. In fact ill cover why buying a car is not an investment in a post soon.
3. Move closer to work
This might not make sense to a lot of people in Goa especially if you are living with your parents. But if you aren’t, this is a keystone change that can save you thousands and let me tell you how.
A lot of my friends work in Panjim and live in the burbs. The latest area is what’s called the greater Panjim area which is about 8 kms out. Lots of people like to drive to Panjim from there. Lets consider a cost of 5KMS per INR in driving and 20 minutes each way to drive. From the fuel costs we’ve worked out that’s INR 80 in fuel. Parking costs another 10 INR a day. That’s 90 INR each day. Once again 25 working days. 2,250 INR in a month on driving plus 16 hours of your life gone in commuting. Just from the time perspective that makes absolutely no sense. Plus throw in the cost of eating out. And the frustration and tiredness your commute brings. Move closer to work ad cycle or walk to your workplace. To cut this expense down to 0. Of course, unless you’ve been living for free, now you have rent to worry about. But if you’re already renting, then moving closer to work thou inconvenient will save you a ton.
SAVING: INR 2,250 a month, INR 27,000 a year
4. Optimize your utilities
Any sort of recurring expense you can save on you should. Your utilities are a recurring expense to you each month. A 10% improvement here is a permanent 10% reduction in your expense. You can read the article on how we slashed our electricity bill by 50% here.
SAVINGS: INR 500 a month, INR 6,000 a year
5. Optimise your tax savings and file your taxes
I can’t tell you how many young people I have met that do not make use of income tax savings. In fact, I had a colleague who asked me why I was even bothering with savings and investments or filing taxes. The government will take what it has to was his response. This from a guy who’s taxes were being deducted on a monthly basis from payroll but couldn’t be bothered to understand the system and use the incentives the government was offering him to save. This was 6 years ago. He’s probably much higher up in the salary bands now, and possibly still not filing taxes. A lot of the tax deduction done on payroll can be recouped by using the different sections of the Income Tax Act. But regardless it is mandatory for people to file tax returns if your income is above a certain threshold. Id go so far as to say file your taxes regardless. Even if your net tax outgo is 0. At least you’ll have the support of the tax returns if ever there is scrutiny. But I digress here’s a link to an article on the various tax saving options.
SAVING: 5~10K a year
So all in how much are we looking at in a year a saving of a min of 70 K a year. I don’t know about you but that’s more than a couple of months salary for a lot of people in Goa.