Spending Habits
Some habits are born with you and die with you.. Some can be changed..
Spending Habits can be definitely changed for sure, since I did change it.. 🙂 I was not tracking my expenditure for a long time and I am sure most of us are like this.
It was hard for me to track the expenditure(Honestly, lazy). I decided to track it. For that I wanted to do something. Then I used google’s excel sheet.. I used a simple spreadsheet. which contained the following information.
Expenses
sl. no Date Food Movies Petrol DVD Clothes Snacks Books Misc
I used to update it daily. I was not sincere in the beginning. So the first month I could not get the correct figures. I cursed myself for doing it and later again I tried to do it. This time I did populate the data meticulously and then after three months of data collection, I figured out my spending pattern. This clearly showed me where I was pouring my money and whether it is possible for me to change it if needed.
I made up my mind to reduce a few and stop spending few areas (in Misc). This way I did put a check to my spending habits.
This seriously helps..
Self Control
Self control is the most essential part to control spending habits. We are forced to buy new gadgets, DVDs, clothes and so on. If we learn to control our desires not to indulge in buying spree we can have finances in shape.
EMI (Easy Monthly Installments) has changed the course of life for most of the people. It gave them enough spending power which they could not dream of. Many people thought it was a boon but in reality its a curse in disguise. Let me elaborate on this:
Think that I want to buy a Television which costs Rs. 1000 and I have just Rs. 100. If I save up Rs. 100 for next ten months then I will have Rs. 1000 and within a year I can own that television. But instead I prefer to buy Television with loan. The loan offered to me is Rs. 900 at 5% interest per annum (i.e. I have to pay Rs.105 at the end of the year if I borrow Rs. 100).
The EMI for the Television for twelve months is calculated in the following way:
(1000 – 100 ) + [(1000 – 100) * (5/100 )] / 12
==>(900 + 900 * 5/100 ) /12 = 945 /12 = 78.75
At the end of one year I will be paying Rs. 1045 for Rs. 1000 Television. If I to buy the same Television by saving money then it would have taken ten months and strict discipline of saving money (which most of us lack).
We are willing to pay more just to make sure we get the things at the time we want. There are complications in life and every time we cant say that we can make the payments at the right time. This will cause problems financially and we will end up paying much more. I have taken a very simple example to keep the maths simple and you guys know what is the Rate of Interest in the market these days.
My Conclusion is always try to save up money and plan up things before you just go buy it. Don’t buy things on credit this is not a good sign for your long term financial freedom.
Engineer's Finance 