Yesterday we talked about Salary and today we will talk about Expenses.
ting ting..
- SMS 1 (Your Salary 50,000 is credited to your ICICI account xxxx3210)
- SMS 2 (EMI 15,000 paid for Home Loan)
- SMS 3 (EMI 8,000 paid for Car Loan)
- SMS 4 (EMI 5,000 paid for personal Loan)
- SMS 5 (Cash withdrawal 10,000 at the ATM)
pheeuuu... Money gone in the air..
Salary - Expenses = Leftover money for living dream life.
But what if the salary if finished in the middle of the month?
Well.. people take easy loans and buy stuff on EMIs
Salary - Expenses + Loans = Debt for living slavery life.
All loans are not bad. We will talk about good loans and bad loans in the upcoming lessons.
But it's an amazing feeling to live debt free life, isn't it?
You would get super quality sleep when you don't have to pay the EMIs.. and you can take bigger financial risks in the life.
You can also take better financial decisions when you know where your money is going.
Your effort should be to retain as much money as possible in your account (without compromising with your lifestyle)
I am not going to preach you to save money on daily coffee because that won't make you rich. But you should know how much money you are spending on drinking coffee every month.
#1. Record every little expense on daily basis
You would not recall little expenses (especially cash transactions) after a week..
So the expenses should be recorded on the same day.
Use spreadsheets or mobile app to track the expenses
I personally use spreadsheets to record my expenses because I love Google Spreadsheets.
You can use money management apps like MoneyView, mTrakr, Chillr.
Money tracking apps would give you the complete picture of your expenses.
#2. Check the statements
Match your bank accounts and credit card statements at the end of every month with your daily sheet to find unrecorded or suspecious transactions.
You may find any banking fees or fraud transaction which could be reversed by the bank.
I mean, you should know where your money is going.
#3. Categories the expenses
Your spending consists of both fixed expenses and variable expenses.
Fixed expenses include rent, EMI, insurance and utility payments which are same every month.
You'll have more room to adjust variable expenses like food, clothing, movies and travel if you want to retain more money in your account.
#4. Identify the possibilities
Tracking expenses can help you spot the possibilities of reducing expenses.
- You may find recurring subscription services like Netflix that you are paying unnecessary.
- Paying huge interest upto 48% p.a on your credit card bills every month on the outstanding amount.
- You spend more on luxuries like expensive clothes, regularly going out for dinner or travel.
Once you identify the possibility, the next step is to make small changes in your spending habits.
Assignment #1.
Would you complete the exercise as your first assignment of Financial Freedom Course?
You can either enjoy reading the course as entertainment or do some practical work that may actually improve your financials.
Ready?
Pick up the statements of your saving accounts & credit cards from Jan 2020 ...
and find at least 3 big expenses which could have been postponed to 6 months.
Reply to this email and tell me the number!
Pardeep Goyal
PS:
If you really want to improve your financial health start giving priority to investment before spending.
Even a small investment of Rs 1000 per month can make you rich. For more details wait for my next email.
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