Five tips to avoid wasting money

Are you finding it impossible to save every month? While it's easy to pin the blame on high inflation, perhaps it's your spending behaviour that is responsible for the higher outflow. Go through these common reasons for money wastage and the ways you can plug them

1.Don't roll over your credit card balance

Debt qualifies as one of the biggest money wasters. While good debt, such as a home loan, can help you build an asset, a bad debt like rolling over credit card balance can deplete your savings. In fact, it's one of the worst types of debt because of the high interest rate (typically 12-42% per annum) that credit card companies charge. So, if you have a Rs 15,000 balance on a card that charges 3% interest every month, you will have to pay Rs 450 a month. Over the year, it will add to a sizeable Rs 6,386 (if the interest is compounded), which translates to an effective interest of 42.58% per annum. So, pay your bill in full every month. However, credit cards can also be beneficial if you always pay your bills on time and in full, since you can build a good credit history. Besides, most cards come with enticing offers, such as cash back and reward points. Take ICICI Bank's Platinum credit card, which offers three points for every Rs 100 spent. On collecting 2,000 points, you get a gift voucher of Rs 500 of a popular retail store.

2. Keep vices at bay

An addiction can become a money-sucking black hole. If you smoke five cigarettes a day, more than Rs 10,000 of your wealth goes up in smoke every year. The gutka users, who consume five pouches a day, are chewing up almost Rs 7,000 in a year. These vices don't just affect your health and eat into your annual expenses, but also result in a higher premium when it comes to buying health or life insurance. For instance, a 30-year-old non-smoker will pay nearly Rs 4,100 a year for an online insurance cover of Rs 50 lakh for 30 years, but if he smokes, the premium will jump 40% to Rs 5,800.

3. Don't keep gadgets on standby

Of the total electricity consumed in an Indian house every year, nearly 5% is used by gadgets on standby mode, according to the data released by the Bureau of Energy Efficiency in its report, Standby Basket of Products, in 2010. The electronic items that display a clock, such as a microwave or radio, or those that operate through a remote, such as DVD players and air conditioners, are typical culprits. For instance, an air conditioner consumes 40 watts an hour on a standby mode. This means that you're adding about Rs 75 to your monthly electricity bill for no reason (read 'How to slash Rs 3,500 on your power bill', February 6-12, 2012). The obvious way to lower your electricity bill is to pull the plug on these gadgets, literally. If you are too lazy to turn off each power point individually, get a power strip where you can plug in all your gadgets. Switching off the smart strip will cut the power supply to all gadgets.

4. Save on banking transactions

In the past few months, banks have revised fees for various services that were free till now. So, if you don't keep track of these revisions, you are likely to see your money trickle out as penalty. For instance, several banks have made the maintenance of minumum balance in a savings account mandatory for each month instead of a quarter, and the penalty for non-compliance has also been raised. Similarly, the 12 free branch transactions in a quarter have been reduced to four in a month, again with a rise in penalty. Phone and Net banking are a good way to avoid some transaction fees.

5. Ask for discounts

Bargaining is your birthright, so never be embarrassed to ask for a discount, whether you're buying a laptop or a car. Every dealer is keen to make a sale, so he'll be willing to compromise a bit on his commission. Usually, you can have the price lowered by 5-10%. The trick to bargaining is to do your research well. Check online stores and visit a few brick-and-mortar shops to check the variation in prices. You can also ask for a discount if you pay by cash since this saves the store the cut it has to pay the credit card company. You should also ask for coupons at various eateries, mostly fast food joints, and supermarkets if you've spent a sizeable amount while shopping. These coupons can help you save money the next time you shop. While dining out or booking a movie, check which credit/debit card offers a good deal. For instance, if you book a movie on Bookmyshow.com using a Visa card, you could currently get 25% off on the price.

Source : ET

Don't Cut Expenses. SPEND! SPEND! SPEND!

 

A Very Interesting article , I came accross , thought of sharing it with every one . This article was written by  Kim Koyasaki . Quite Interesting and worth reading . I hope everyone will understand the importance of passive income through this article . Here it goes  

If I hear one more financial advisor tell their audience to “cut your expenses,” I may just do something I will later regret. Personally, it’s insulting to me, and it should be to you too, if a financial “expert” thinks we are so unconscious and ignorant that the only way we could possibly reach financial security was by cutting back, reduce what we spend and live a life less than what we really want.

That is LAZY advice. It’s safe advice for the so-called “advisor” because it sounds logical and it won’t cause any flack for the advisor. It’s lazy because the advisor doesn’t have to think.

Cut vs. Spend

Not only is “cut your expenses” lazy advice it is also incorrect advice if you truly want financial security for life. Consider this; you own a duplex that you rent out to two families. In any rental property, as in any business, your three key financial components are: 1) Income 2) Expenses 3) Debt.

What are the first questions you should ask when it comes to income, expenses and debt?

INCOME – Very simply, “How do I increase my income?”  Whether it’s your rental property, your business, or your personal household, often times, the solution to a financial problem is to increase your income.  In real estate, ways to accomplish this is by lowering your vacancies, introduce alternate streams of income such as laundry, and increasing rents.

EXPENSES – Most people automatically ask, “How do I cut my expenses?” Wrong question. The better question to ask is, “How do I spend my money more effectively to increase the value of my property?” “How do I spend my money more effectively to increase the value of my business?” (And yes, this is the question to ask when it comes to you personal finances as well.)

For example, you decide the water bill of the rental duplex you own is too high so you choose to cut that expense by cutting back on the amount of water you use on the property. As a result of the water cutback, your trees and shrubs start dying. Now your tenants are unhappy because the landscape is brown and ugly.

Instead of cutting expenses, the better idea can be to spend money. As with a property I owned, instead of cutting back, I spent more money on additional trees and shrubs. This expenditure increased the curb appeal and made the property more attractive to the residents and prospective tenants.

Because this property now had such a lush look and feel, more and more people wanted to live there.  This allowed me to increase the rents. Increased rents equals increased value of the property.

How do you spend money more effectively to increase the value or income, is the exact same question you should be asking of your personal finances.

“How can I spend, or use, my money to make more money?”

This is what I mean when I say don’t live below your means, instead expand your means.

Instead of focusing on reducing your expenses, focus instead on increasing your income. Increasing your income - not by you working harder, but by spending money that then works hard for you. It takes no brains to cut expenses. Anyone can do that. It takes creativity and a little bit of guts to figure out how to spend your money to make money. That’s financial intelligence.

That leaves us with the DEBT question.

The question to ask is, “How do I get the best financing terms?” Too many people focus on the price of the investment, when the deal may be found in the terms, such as the interest rate, length of the loan, interest-only versus 30-year fixed, recourse versus non-recourse.

 

More than once, I have paid full price in exchange for terms that allowed me to get more cash flow, more time if repairs were needed, or more flexibility for future usage of the property. It’s the financing terms more than the price that can make or break a deal. The beauty of debt (good debt) today is that it is cheap. The interest rate of my first rental property in 1989 was 18%. And we still made it cash flow.

What’s the difference between good debt and bad debt?

Good debt is debt you use to buy assets with. (Assets are things that put money in your pocket whether you work or not.) Bad debt is debt you use to buy liabilities. (Liabilities are things that take money from your pocket.)

IT’S TIME TO SPEND MONEY!

So,the real key to happiness? The key to having a secure and financially-healthy life is to Spend! Spend! Spend!  Just be sure to spend your money in the right places. Financial intelligence is knowing how to spend your money to acquire assets that make money for you versus spending money to acquire liabilities that take money from you. That’s the difference that every Rich person knows.

How are you going to spend your money on assets? Please comment