Financial survival-PART-II

In my last article, we spoke about the financial difficulties most people are experiencing due to the current state of the economy and its impact on our daily lives. We spoke about the ways of increasing your income to ensure your financial survival. This time; we will look at the second part of the survival strategy–reducing your expenses.
It may seem obvious but anyone looking to manage a budget, whether it be a business or a family’s budget, knows reducing your expenses is not as easy as it appears. Sometimes, tough choices need to be made and things that you took for granted may have to be given up, at least for a while. Here are some practical tips and ideas on how you can reduce your expenses each month to bridge the gap between your income and expenses.
Start with listing down all your monthly expenses and see what they come to. Are they more or less than your family’s income? It’s important to do this as the first step as it will help you figure out how much of a shortfall you have and what you need to do.
Now carefully, look at all the expenses in your budget and decide if there are any discretionary items that you can do without. If you are a smoker, this may well be the time to give up.
You will be pleasantly surprised by how much money you can save on basic grocery items by shopping around. If you have been shopping at the same stores for a long time, it is time to become a “shopping detective”. Check the prices in several stores before buying the major monthly items. You may have to go to more than one store, but it will be worth it. Check out stores that sell products in bulk and your weekend fruit and vegetable markets and you may be surprised at the savings you can achieve.
The cost of eating out, getting a coffee, entertaining friends, and buying clothes have all gone through the roof. You need to take a hard look at these and see where you can reduce your expenditure. Reduce the frequency of eating out, cut out the coffee sessions, and before buying that new outfit, ask yourself, “Do I really need it?”. Small changes to your lifestyle can have a big impact over the year.
For most people, rent, school fees, utilities, and motor vehicle expenses are among the big-ticket items. Look strategically and see where you can save money. Is carpooling with colleagues an option? Can you take turns with friends for school pick and drop-offs? Do you have alternatives in relation to rent or school fees?
Have you looked at options to reduce your utilities bills? You would be surprised how much more energy-efficient new electric appliances which translates into reduced electricity consumption or lower bills each month. Many people have switched to solar as well to reduce their electricity consumption.
Perhaps, a one-off investment and switching to solar energy or investing in newer electrical appliances may be worth considering. You need to do some cost versus benefit analysis and see how it looks for your circumstances.
By now, you should have gotten the idea. You need to be open-minded and proactive in your expenditure reduction strategies. Look at all possibilities, check out every option, and remember to involve your entire family in the decision-making process. This will ensure that every member of the family is onboard with the tough choices that you need to make. These are difficult times and require all of us to make tough choices.
Many years ago, Pakistan too entered the age of consumer credit with credit cards, personal loans, and car leasing becoming accessible to everyday people. Unfortunately, we do not have the laws to protect the consumers, nor is there awareness of the dangers of consumer credit.
Due to easy access to credit cards and the like, many people end up getting trapped in a vicious cycle of debt. For instance, the interest rate on credit cards has been above 40 percent per annum for many years. You heard right 40 percent.
In times like these, we can easily spend more than our monthly income and when the credit card bill comes, we may not able to pay it in full. This means that you are liable for the interest charge on the balance. Once an interest rate of 40 percent or thereabouts is applied, you end up incurring a sizeable amount in interest which gets added to the balance.
If this happens for a few months, very soon you will be unable to make a dent in the outstanding balance each month. After some time, all you do is pay interest, and the balance keeps accumulating. This starts a vicious cycle of debt that is extremely difficult to get out of. Before you spend any money on your flashy credit card, make sure that you can pay the balance back at the end of the month.
If used carefully, you can turn the tables on the banks by taking advantage of the interest-free period the banks offer you on the credit cards and reduce the need to carry cash with you.
And there is more, with the reduced rate of sales tax that now applies in restaurants when paying by credit cards, you can save real money by using your card.
Please keep my earlier suggestion in mind, only spend on the credit card what you can pay off at the end of the month.
Times are tough, you will need to take the initiative to balance your budget and stay out of the cycle of debt. The good news is that at least there are many options now to supplement your salary and generate additional income and if you are pro-active, you can reduce your expenses as well.

The writer is an Australian Chartered Accountant, International Author and Management Consultant. He can be reached at

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