Animesh Topno, 32, Pune
"Rising living expenses and interest rates have affected our budgets. To cope, we have cut down on eating out, buying books and films, even short vacations."
Took a 20-year home loan in December 2002. The EMI of Rs 16,000 has gone up to Rs 18,500.
But these are tough times, and making a budget seems the least one can do to get through. The first step is to prioritise expenses. “After you make a list of what has to be necessarily paid out of the family budget, you can dedicate the remaining portion to your luxury expenditures,” says Jayant Pai, Mumbai-based financial planner. Expenses such as rent, utility and phone bills, and school and college fees cannot be ignored. Variable optional expenses, however, can be deferred or even done away with. Economise on entertainment, clothing, miscellaneous expenses, gifts and the like.Hundi started buying from wholesalers when he realised his grocery bills were shooting up with no noticeable change in the family’s buying pattern. At around the same time, his kids’ school raised the fees as well as the transport charge. “The school had its reasons for doing so. The price of fuel had gone up and the management expenses must have too,” says Hundi. But it also meant that his own expenses went up. So, apart from buying from cheaper outlets, Hundi had to curtail his spending. “I stopped using the car,” he says.
1. Rent and house maintenance such as electricity charges.
2. Grocery and essential food.
3. Liabilities such as home and car loan.
4. Income tax.
5. Insurance premium.
1. Entertainment expenses on books, music, films etc.
3. Extravagant gifts on birthdays, anniversaries.
4. Home and car repair work.
5. Cosmetics, clothes, gym.
What’s the risk?Recognise these threats posed to your monthly budget.
Increase in number of dependants: You get married, have a child, or your parents start living with you.
Change in job: Salary cuts or unanticipated low bonuses could hurt savings and spending plans.
Loans or debt: You borrow to create an asset such as a home; the repayment commitment will affect your budget.
Retirement: Your income dries up and affects your spending no matter how good your retirement plan is.
Tax laws: A change in direct or indirect taxes can affect your saving and spending patterns.
Inflation: Rising costs will eat into your budget. This will reduce your savings or increase your expenses.
Interest rate fluctuations: If you are servicing a debt, any change in interest will add to your repayment burden. In some cases, this might work to your benefit as well.
Emergencies: Medical needs or even something as innocuous as unexpected house guests could have you dipping into your savings.
— With inputs from R. Sree Ram
When Chandrayaan took off, the country celebrated with enthusiasm and pride. However, when prices followed suit, there was gloom all around. I’m not talking of just one product. That we could do without. But what if the prices of vegetables, fruits, edible oil, fuel as well as the EMIs go up all at once? We have a problem, right?
Planning is for the long term and this kind of a temporary hitch is accounted for over a period of time. In the worst case, you can have annual reviews and action can be taken if the plan is falling apart. For instance, the current home loan situation would have been better for those who have gone for a fixed interest loan. In many cases, the interest can be reset every two-three years if the rates continue to be high.
Here are a few suggestions to help bring down expenses:
• Check discretionary spends as on entertainment and vacations.
• Look out for bargains. Sensing the mood, the retail industry has come up with offers galore which can help in pruning expenses.
• Postpone expenses like buying or upgrading your car, renovating the house or buying a computer.
• Weed out wasteful activities. Combine trips to the market with other errands so that money on conveyance can be saved; use public transport, wherever available.
• Re-look your mobile, cable and landline plans. See, if you have the best possible plan as per your usage.