August 5, 2016 02:00 AM NPT
By: Isha Bista
In the past couple of months, I have been trying to figure out where all the money in my wallet goes. I withdraw money from the ATM every Friday and I draw enough to last me a week but by Monday, or Tuesday at the latest, I’m back at the ATM. Each week, I vow to keep track of my expenses but, like my mother says, the money just seems to vaporize from my purse.
Having said that though, it’s not that I have a problem managing money. My husband and I have always made enough to cover rent and pay our bills on time. We have also never taken loans and have saved quite a bit. But, I have to admit, both of us are spendthrifts who don’t really know what we have spent our money on till it’s gone.
One too many times my husband has reached into his wallet to take out some cash only to see that he has spent it all. That has happened to me too. I think I have enough to cover for something and when I see I don’t, it only takes a minute for me to realize that I have spent it on random, unnecessary things. I mean, how many vegetable peelers does one really need? I have four. I just can’t seem to resist buying such knick knacks whenever I go to Bhatbhateni.
A friend of mine once told me that she would easily spend Rs 3000 buying things she didn’t need or want when she stepped in at Bhatbhateni. This was causing a severe dent in her finances because at the end of the month, all these little reckless purchases added up to a substantial amount – money she could have put aside for groceries, bills, or even travel.
Looking back on my own spending habits, I have come to realize that my most expensive possessions are the roll of fat on my waist and my husband’s belly bulge. My husband and I love to eat out, so much so that we actually eat out more than we eat at home. This, needless to say, is where most of our money goes. We are estimating that we’ve spent almost 30% of our collective earnings on restaurants and bars.
We also realized that we are quite lavish with gifts and always seem to be paying a bigger share while pitching in for celebrations and surprises. Coupled with our habit of not giving a second thought before buying anything, this was the reason we never seemed to have enough money despite drawing good salaries.
The thing with money is, if you aren’t careful, all the wealth in the world won’t be enough. There is always something you want and that something will lead to another and another till it will slowly eat away at your savings. A colleague recently confessed that she finishes her salary in two weeks time, and that her savings account currently has Rs 700 and that’s because Rs 500 is the minimum balance required to maintain that account.
Everybody struggles with money but some just seem a lot better at managing it than others. A relative recently said that she has halved the amount she spends every week by following a simple rule: She pays in cash for everything. This forces her to stick to a budget and rethink her decisions before splurging on anything.
With plastic money being so convenient it’s easy to get carried away. How many times have you not had enough to make a purchase only to whip out your debit card and walked away with something you could have done without? Exactly. Recently, I found two receipts in my wallet while cleaning it out and I had to actually sit down and wrack my brains about what I had bought for Rs 5600 and Rs 4775: A pair of sports shoes I didn’t need but wanted because it looked so nice, and another pair of sunglasses because again, it was so nice.
So what this relative – my aunt – said got me thinking. Maybe we could cut down on our spending if we made a strict budget every month and were forced to stick to it by paying in cash for everything. Till then, we had been withdrawing money from the bank for personal use while using our debit cards for shopping for groceries, clothing, and making other payments.
I googled ‘paying in cash’ to find out if others have had similar experiences like my aunt. I wasn’t going to wean myself off plastic money just because she said so. But, according to an article on soundmoneytips.com, people will spend more with a card compared to cash. In fact, a study found that people spend 12-18% more when using debit/credit cards than when using cash.
Only carrying enough cash to buy what you need or the things on your list can limit the damage. This is the best way to keep shopping within your budget. If you are motivated, you will find discounts or cheaper alternatives to your regular brands to make that cash go further. After all, nothing spurs creativity than the lack of money and the need to get by on less.
Carrying cash forces you to be a conscious spender and be careful about what you pay for. You withdraw a limited amount and watch it dwindle. It’s a primal instinct. Since we’re more motivated by loss than by gain, parting away with your hard earned money will make you a better spender, and thus a better saver. My husband and I came across a very interesting idea while scouring the Internet for ways to manage money better. It’s called the Dave Ramsey Envelope System.
You basically withdraw what you expect to spend on each category (eating out, clothes, bills, groceries, etc.) at the beginning of the month and put it in envelopes or a filing system. You only spend that amount per month and that’s it. What I have done is made sections in my wallet with index cards and put a post it note on it as a label for what’s it for. This just looks much tidier than carrying several envelopes, and works the same.
The point here isn’t to save thousands of rupees using this tip, but to force yourself to actively spend and notice what you’re overspending on. That way you can cut back on unnecessary spending. However, be careful not to borrow from other envelopes, or sections. When it comes to the envelope system, it can be very tempting to borrow cash from one to fund some other activity.
According to the financial expert, Dave Ramsey, the very purpose of the envelope system is to curb your spending and teach you discipline. When you run out of grocery money, you eat leftovers instead of going food shopping. If you see your petrol money is slipping away faster than the remaining days of the month, then limit your trips or take the public transport. My husband and I have been doing this for almost a month now, and we find that the envelope system is actually a great way to corral our spending.
I have also realized that once you get into the habit of keeping track of your expenses, it’s hard not to do so. And that makes it easier for you to manage your money. We still have a long way to go as we have just started this new budget system, but reading about how many people have benefited for the plan and watching videos on YouTube, I’m positive that this will fatten our savings account and we will soon be able to take that trip to Australia we’ve been dreaming about ever since we got married.