Reduce monthly expenses – Long live cash economy!

Last Sunday, I and Ruchi were having discussion on finance (hmm…hmm…). She wanted a credit card because a sweet girl from a bank was soft-selling it. Well I wanted to meet that sweet girl, but that could be another story altogether. Coming back to the point, Ms. Sweety tried to persuade Ruchi  by telling her that she will have 10% discount on the stuff she purchases and also that the card is free for the  life-time. I am a very emphatic individual and lent my ears to Ruchi’s full flow of convincing arguments.

Ruchi’s Point of View: - Need a credit card as it offers 5-10% on the purchases and the card is free

Rathin’s response: - You already own a debit card which you can use. Despite the discounts, you will end up spending much more than the budget decided. I tried reasoning it out that one will spend more to buy the products which were not needed in the first place.

That set me thinking – how can one reduce spending on unnecessary items.  Solution will be to go back to the roots – Spend in cash. The reader will think that I am crazy to propagate cash economy in the jet and plastic era!

Either debit card or a credit card - If the amount straightaway goes through a bank transfer one doesn’t bother too much. Just take an example – If I have Rs.30000/- in my account and I see a UCB shirt worth 1500/-, I won’t think twice and immediately swipe my card. On other hand, if I withdraw Rs. 5000/- for my personal monthly expenses every month like pocket money and then see this shirt, chances are that I will surely think twice or more.

Try this once.

For reducing your monthly expenditure, withdraw Rs.10000/- (you can choose your limit – but try to keep it to the bare minimum for expenses on fuel, grocery, internet, power, telephone, child education, restaurants etc.) and only spend within this amount. Forget that you have an ATM / debit card (rather just keep it away from you in a safe). You can’t withdraw more than the initially withdrawn amount. So that will make you evaluate your purchases before you pay for it finally. I believe, if you follow this regularly, you will have a better control over the expenses. You will score brownie points if you can save something from the withdrawn amount and put it in the piggy bank like the old times when we were kids.

I gave this pitch to Ruchi. She might implement it in the next financial year. You may also do so…Worth a try! However, I am not going to follow my own advice, as I am in the splurging mode!