Thursday, September 11, 2014

Some Simple Tips To Save Money

With Inflation and Cost of Living going out of the roof these days, we are all striving really hard to Earn More or to Invest Wisely or to Pick up a Part-Time Job etc etc. All this is very good. Obviously, nothing can replace "More Income". However, there are a few simple tips that can actually help us reduce our expenditure which in-turn can result in "Additional Savings". The Idea behind this article is to suggest a few very simple, easy to follow Ideas that can really help us reduce our monthly expenses..

Before we Begin: 

Many of the ideas here might sound like - "Aah, I already knew this" types. More importantly not all of us may have the luxury or options of following them due to certain constraints. So, browse through the list and try to implement as many as possible. A point to note here is that, only Ideas that can result in quantifiable cost savings are listed down here.  

Idea No. 1: Eat at Home - More Often 

In this current generation where both husband and wife are employed, either or both of them come home pretty late in the evening and end up dining outside. Though this is inevitable in many cases, at least try to make dinner at home on days you reach home on time. If you are someone who has the luxury of a "Home Maker Wife" then try to get your lunch packed. Your wife is anyways going to pack lunch for your kid(s) and I am pretty sure she would have absolutely no issues packing lunch for you as well. Some people have this illusion that carrying a lunch-bag makes me look aged. Trust me, if you try this out for a month and calculate how much you save at the end of the month/year - you will feel Awesome...

Dining Out - For 2 Pax: Avg. Rs. 100/- per day.   
Dinner @ Home At least Twice a Week: Rs. 1000/- saved per month  
Lunch @ Office Canteen: Avg. Rs. 40/- per day   
Getting Lunch Packed Dily: Rs. 1000/- Saved per Month 

Idea No. 2: Always Pay your Bills - On Time 

Most of your monthly bills like - TV, Internet, Phone, Credit Card etc come with hefty fines if you miss the payment deadline. Many of us are very busy and occupied with our day-to-day work and end up consolidating these payments maybe Once or Twice a month. This can actually result in missed payments and fines. You may not mind paying a 50 or 100 rupee fine for late payment once in a while but if this is a recurring pattern, imagine all the money you are wasting unnecessarily?

All we need is a little organization. For the next couple of months, track the dates when all your bills come-in and make a TO-DO List that would remind you when each bill is due. I do this and trust me, the first couple of months was very hard because I had to literally check my letter-box everyday but now I know when each of my bills is due and it has been over a year since I actually missed a bill payment. 

Savings Quantifying this is actually difficult but lets assume one bill getting missed every 2 months and that bill comes with a Rs. 200 fine for late payment (Like most credit cards).   
Missed Credit Card Payment: Rs. 200 fine  
5 Missed payments in a year: Rs. 1000/- wasted   
With our Credit Score being given so much more weightage these days, missed payments can significantly dent your credit history and cause problems in future when you want to go for a Home Loan or Car Loan..

Idea No. 3: Always Track your Overdraft Account 

These days many banks are offereing Overdraft facility for customers who hold "Salary Account" with them. An overdraft account is nothing but a facility where the customer can actually withdraw/use more funds that he actually has in the account and then repay once funds area available (More or less like a credit card). However, every time you dip into overdraft money, you are charged a fixed fee (Around 200 to 500 rupees). Plus, the money you use is chargeable at hefty interests (Around 10-12% per annum or more). On top of this, you are charged a yearly "Annual Fee" as well. 

So, firstly, if you are someone who always maintains enough balance in your bank account and would not need this Overdraft facility, "Surrender" this option. You can save easily around 1000 rupees or more in Annual fee every year. If you are someone who needs this overdraft facility, try to limit the number of times you dip into the overdraft account. 

Surrendering an Unused OD Account: Avg. Rs. 1000/- saved per year   
Cutting down at least 3 instances of Dipping into the OD Account: Avg. 750/- saved per year (@ Rs. 250 per instance) 

Idea No. 4: Know Your Bank's Minimum Balance Requirements and Always Track your Bank Balance

You may think I am crazy to actually suggest this as an Idea but sadly,  many of us not are fully aware of what is the minimum balance requirement in our bank account. Some banks expect 5000 rupees and some expect 10000 rupees. Most banks charge you penalties & fees for "Not Maintaining Sufficient Balance" in your account which is a few hundred rupees for every instance your balance goes below this threshold. On top of this, if you issue cheques or set up recurring bill-payments that bounce due to insufficient funds banks hcarge hefty penalties (At least 500 rupees or more). Not to mention the hassle and head ache of chasing down the person who we owe money and explaining the error hoping for the fact that they wont legally sue us. In case of recurring bill payments, add the penalties for missed payments plus they too will charge you for bounced payments. 

Example: Auto-Pay Credit Card Bill on your Bank Account which expects you to maintain at least Rs. 10000 as minimum balance   
Amount Due: 10,000 rupees 
This month Bank Balance (On Clearing Date) Rs. 8,000  
Missed Payment charges (From Credit Card Side): Rs. 250  
Late Payment charges (From Credit Card Side): Rs. 150  
Interest Charges (From Credit Card Side): Rs. 250   
Payment Bounce Charges (From Bank Side): Rs. 500   
Not Maintaining Minimum Balance (From Bank Side): Rs. 250   
A simple oversight error where you actually forgot that your credit card bill is due on a certain date will cost you Rs. 1,400/- rupees plus a damaged credit history

Idea No. 5: Dont Just Use Any ATM. Use Only Your Bank's ATM

Gone are the days when banks offered you the privilege of using any banks ATM Machine if you have a "Salary Account" with them. These days banks charge you for using other bank ATM's and this fee ranges from Rs. 50 to Rs. 200/- per transaction. Many banks offer a certain number of free transactions every month/quarter but keeping track of how many times we actually used another banks ATM machine is an added headache. 

So, the best option would be to use only the ATM machine of the bank with which you have your account. Of course this idea isnt really applicable when you are in an emergency kind of situation (On a vacation/trip in a town where you are not able to find your banks ATM) but as far as possible, lets try to avoid this fee. 

Savings: No. of Transactions in Other Bank ATM's each month: At least 2-3
Fee for using that ATM: Approx Rs. 200 per month  
Amount Wasted per year: Rs. 2400/- 

Idea No. 6: Avoid Credit Cards with Annual Fee

These days most banks issue Credit Cards that are "Free for a Lifetime" which means No Annual Fee. But, sometimes banks add a "Catch" to the card member agreement where the card isnt actually Free. They say - Free If you Spend at least Rs. 50,000 in a year or some sort of condition. If you fail to meet that condition, you will be charged a hefty annual fee (Usually around Rs. 1000 or more) 

Then there are those cards that charge you hefty annual fees just because those cards are considered cool to own. Many people apply for credit cards from certain establishments just for showing off as a "Status Symbol". For Ex: Owning an American Express credit card would cost you around Rs. 5000 in annual fee each year. That is a lot of money. You can actually get a free-for-life credit card from most major banks in India that are co-branded with either Visa or MasterCard that will offer you just as much features like Amex at little or no cost. Of course, you cannot flaunt your Visa credit card because just about everyone would have it... 

Savings: Annual Fee for one credit card: Avg. Rs. 1000   
No. of Credit Cards Owned: 5  
Amount Saved by Switching to Free Credit Cards: Rs. 5000

Idea No. 7: Use your Landline Phone

In this day and age of Mobile phones, we make almost all our calls using our mobile phone. But, we invariably have a land-line phone because your Internet Service Provider usually bundles the landline phone and internet connection. This landline usually comes with its share of "Free outgoining calls/minutes" and in some places like Singapore, calls made via landline are unlimited FREE. Irrespective of what mobile phone you use (Prepaid or Postpaid) the number of minutes available for outgoing calls is limited. In case of prepaid the phone will get disconnected when you cross that minutes barrier and in case of Postpaid the amount you will pay beyond those initial minutes is hefty. 

Why not use your landline to make some calls? we can save a lot of money this way..

Savings: Average Mobile Recharge each month: Rs. 1200 (Rs. 1000 + Rs. 200)   
Amount saved each month by using Landline Phone: Rs. 200 per month 
Avg.  Amount Saved in one year: Rs. 2400 

Idea No. 8: Always Keep your Automobile in Top Condition (Service Regularly) 

One of the things many of us fail to do is - Keeping our Automobile (Bike/Car) in Top condition. We usually use it until the point that it breaks down (or is on the verge of breaking down). Though this is ok, the fact is that, by servicing our car/bike regularly we can accomplish three things:

1. The Ride Quality will always smooth and chances of unexpected breakdowns or problems is reduced signifiantly
2. Though the regular service cost runs into a few hundred rupees each time, by keeping the car in good condition, you can save a lot of money on unwanted replacement of spares due to improper servicing. For ex: By replacing your engine & Gear oil every 3 months, you can keep your engine and associated components in prime condition. Yes, this will cost you a few hundred rupees each time but imagine having to replace your Engine or Gearbox?
3. By maintaining your vehicle in proper condition, it will not unnecessarily consume fuel. With the price at which we get Petrol & Diesel, saving every liter of petrol counts. By properly maintaining your Car, your cars mileage will improve by at least 1-2 km per liter. If you drive 500 kms per liter, you would have earlier had to fuel 50 liters (@ 10 kmpl). Now, you will just have to fuel 42 liters. 8 liters worth of Petrol/Diesel saved right away. 

Savings: Amount Spent on 4 quarterly services on your Car: Rs. 8000 (Rs. 2000 per service including Engine Oil)  
Cost of Replacing an Engine: Rs. 25,000/-  
Potential amount Saved: Rs. 17,000/-   
Amount Saved on Fuel: Rs. 500/- per month (or more depending on how much you drive) 

Idea No. 9: Switch Off All Electronic Appliances - Once Used

Did you know that when you hit the "Power Off" button on your TV Remote and leave, your TV continues to consume around 10-15% of electricity in the background? In fact most electronic devices consume about 10% electricity while in stand-by mode. Your laptop, Mixer, Microwave, Dishwasher, Washing Machine etc - all of them consume electricity when the "Power Switch" is still "ON". So, if you are done watching TV, dont just power off using remote, switch off the power supply. Do the same for other devices also. 

Savings: Average Electricity Bill Per Month: Rs. 2000/-  
Amount Saved by Switching Off: Rs. 200/- per month  
Amount Saved in One Year: Rs. 2400/- 

Idea No. 10: Pay-Off Loans & Credit Card Debt As Soon As Possible

Any loan that you are repaying includes two components - Principal and Interest. The principal is the actual amount that you borrowed which you are repaying. But, the Interest is the fee's that you are paying for the loan. So, the earlier you repay the loan, the lower the interest you are repaying. 

Sometimes, it may not be possible to pay off our credit card in one shot. In such cases the card issuing bank will charge us an Interest until the date that you fully repay the original outstanding due. So, try to repay this debt within the first 2-3 months because the interest is usually calculated from the date of purchase and on the full transaction amount even if you are repaying a part of it every month. 

So, if you get any sudden influx of funds (Ex: Bonus) pay-off loans and outstanding debt. 

Think of it this way - The money you are paying as Interest is nothing but Money you are giving the bank to become rich. You have a duty to repay the loan/amount you borrowed but it is also your right to repay quickly with as little Interest as possible. So, paying interest over a long duration of time is as good as throwing away money... 

Some Last Words:

Some of these Idea's are pretty straightforward and are easy to implement. Some of these ideas may not be feasible for you. For ex: you may not have an Overdraft Account which means Idea no. 3 is useless for you. Similarly, if you dont own a Car or Bike, Idea No. 8 will be useless for you. Irrespective of how many Ideas you can follow, each of them will result in sizeable cost savings which you can utilize for other essential expenditures..

Happy Saving Money!!!


  1. I do not think any bank charges Rs 100 to Rs 200 for using other bank ATM. The charges range from Rs 17 to Rs 25

    1. Vinod - It is just a sample example calculation. The actual charges usually vary from bank to bank and based on how many times you actually use the other bank ATM.


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