Are you a person in a family who is paying a major part of the salary as EMI and keep thinking "When does this going to end?"?
Are you the person who thinks more than twice before shopping anything for you or for your family members and still wonder "Where does our salary go?" every month?
Here is a solution to actually analyze the monthly income and expenditure happening in a normal "EMI paying family", plan to save and invest optimally.
Once the salary is received every start of the month disintegrate it under the below said categories. It can be either done in an excel sheet or a simple account notebook.
List the expenses which are fixed for every month. These static expense parameters are almost the same throughout the year. So it may include expenses like
• Insurance paid for the family members or vehicle.
For easy reference maintain a calendar separately in the back of the accounts notebook or a separate excel and note down the amount to be paid for every month for each family members. This may be monthly or term or annual payment. So each month you might be paying for at least one of your family members. Adjust maximum payment in the month where you might get the maximum salary with arrears or reimbursement money or bonus compensation so that it does not affect other expenses.
• Gold investment/Chit
Since gold rate is rocketing high, people has got the mind set to opt for monthly gold investment scheme or term investment. Some might even prefer to save money in the form of monthly chits.
• Maintenance amount paid for the apartment association.
• Electricity bill
• Mobile bill
• Internet bill/Television cable provider bill
• LPG Gas bill
• Maid salary
• School Fees
This might be term payment in most of the schools but it is wise to allot one third of the fees every month to avoid the last minute shortage.
• Monthly Savings
This is the most important factor which everyone has to ponder. Allot at least 10-20% of the salary as savings and transfer it to your savings account once you receive your salary so that this part of money is not available for you to spend. Never ever touch this money until and unless it is an emergency.
• Credit card bill
It is better to have the credit card bill under static expenses in order to keep the bill constant every month so that you won’t be tempted to purchase more than the monthly limit and keep the monthly limit to the minimum. Also avoid using credit card in all possible ways. This amount is entered in the last week of the month when the bill arrives.
Owing to the increasing petrol rate everyday, it is better to keep the petrol expenses as one single section so that you will come to know how much you are spending on petrol every month. This will actually inspire you go for car pooling or public transport or healthy options such as cycling.
The better way is to buy groceries once every month probably the first week end of every month. Attach the monthly groceries bill on the corresponding month page of the account book or take a photo of it and attach it to the excel sheet for future comparison of groceries rates. Better buy vegetables twice every month in bulk from wholesale market available in your location. This actually reduces a lot of expenses every month.
Eat out expenses
Once we start seeing our expenses which we spend for eating outside, we actually will start cooking and take home food or go for healthy and economic hotels. If you are really tempted you can go for an expensive hotel once in a month. Try to avoid frequent intake of pizza or burger since those are very costly and not good for health.
This section includes the unexpected medical expenses and vaccination expenses for the kids. Though this could not be avoided, we will come to know how often you are falling sick and we may analyse the root cause of it. It might be even directly proportional to eat out expenses which will encourage us to take home food often. It is advisable to go for Master health check once we cross the age of 30. This will put an end to our recurrent problem like frequent stomach upset or heart burns.
Movie ticket bills, weekend shopping expenses, gift expenses, travel ticket expenses, parking expenses come under this category.
Most of you might wonder why there is a separate category for diapers. Diapers are one of the costliest and expensive purchases every month if there is a baby or toddler in your family. Once you come to know the amount you are spending on diapers, you will actually go for alternates like reusable cloth diapers or start potty training the baby which has been postponed so many times.
Most of the expenses are covered in the above said categories. They should be marked "cc" for expense spent from credit card to avoid double entry. Now at the end of every month sum up all the expenses in different categories and do not forget to subtract the credit card bill considering the credit card bill. Now deduct the expense amount from your monthly income. If your answer is positive, "Congrats!" you are a good financial planner and you have started saving and this amount and the Savings amount from the Static expense can be paid for the loan apart from EMI so that you could close the loan sooner than expected or split the money and keep it aside for emergency. But if your answer is negative "Wake up!” you should gear up and look into the category where there are out of pocket expenses. Those categories should be given a limitation from the next month. So if these rules are followed it is quite easy to lead a hassle free and contented life.