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To buy or not to buy is an old story. The new story is to be this or that. We are definitely spending on one thing or another. It is not that we are not spending at all. The only thing we as a consumer are doing is deciding whether to buy this or that. Some of us do not even do that, we just end up buying everything because of our 2 best shopping companions’ credit cards and EMIs. People have stopped justifying their expenses and this is the reason why there are not enough savings and thus, reduced investments. You can save only when you spend less and thus, I have dedicated this article on how and where we spend extra and how can we control our spending.
- Buying on Impulse – This would be the most common way of going off-budget. Have you bought something and then realized that you don’t enjoy it anymore or you aren’t as excited about it as you were at the time of buying it. It is very common to do the same, especially when you are not feeling very good, you see your neighbour own something that you always wanted. To avoid this, don’t buy something that you like when you see due to certain emotions/influences immediately. Go back. Sleep overnight on that purchase. If next morning you wish to own it, go back and then buy it.
- Carrying credit card balance – Using a credit card to buy the new laptop, phone or even those expensive shoes online. Having that credit card balance has become the way of life for most of us where consumer credit is so easily available. The problem arises when it is used for regular purchases. Paying interest as a failure to pay off credit card bills makes the prices of the charged items a great deal more expensive. We have written it in detail in our Article – Why you must avoid credit cards.
- Avoid paying bills on time – Have you ever missed paying your telephone bills or other utility bills at home? In this time of auto debit/email reminders/ Paytm reminders, it is still so surprising that so many people with balances in their bank accounts forget to pay their bills on time and are completely ok with doing the same. For instance, if you have 4 credit cards and you are not clearing the minimum dues on time, you would be paying at least Rs. 2,000 in late charges alone. However, if the same amount is invested every month in a scheme that earns, say 10% annually, it can actually fetch you 32 lakhs in 25 years.
- Spending by habit: Quite often a lot of our spending is a daily habit, which could be unnecessary too. For example, if you buy a takeaway coffee every day for your office staff/visitors why not invest in a coffee machine? Re-evaluate your habitual spending patterns and decide whether that is necessary.
- Having unused memberships/subscriptions – Everyone has an account on Netflix, Hotstar, Amazon Prime, Voot TV, the unlimited data pack, household cable with HD. All of this totals to around 2000 INR per month. The same is equivalent to Rs. 24,000 per annum. Do you have enough time and resources to go online and watch movies on all of them? A person on average is spending 24,000 per annum for his entertainment solely through online channels. I have not even considered the money spent on theatres and other modes of entertainment. Gym memberships are other classic examples of unused memberships.
- Paying for unnecessary services/charges – When a seller is selling something new in the market, it is their job to create a requirement for their products but it is up to a consumer to judge sensibly if they actually need that product or service. You may sometimes need a car helpline service, but why to go for the extended warranty on a car or washing machine when that is hardly worth the price? Do you also really need all those extra features for your cell phone?
- Not having clear needs in mind: People tend to overspend when they don’t have a clear objective of what they need to buy. Thus, they often end up buying things just because they ‘look nice’ and not because they are actually needed. Therefore, avoid getting inside a mall without a clear objective. Window shopping has put most of us into huge debts or low cash balances.
- Living beyond one’s means – The availability of car loans to buy the first cars or easy access to credit cards can tempt anyone to indulge in buying things even without being able to afford the expense. But just because you own a credit card, it does not mean you should indulge in whatever you fancy at the moment.