Jerry Simpson is a 30-year-old professional in the US. Being young, successful and single, he never cared about his monthly income-expenditure economics. In 2005, he bought a five bedroom house costing more than USD 400,000 with a monthly installment of approximately USD 2,800.
Unfortunately for him, the US has witnessed a steep drop in property prices. Add to that a cash crunch and the economic slow down since 2007. The value of his house dropped to a mere USD 220,000 and he couldn’t afford such a big installment. He was left with no option but to go for foreclosure.
Cut to India: Deven Kukreja has been working with a Business Process Outsourcing (BPO) for the last 3 years. Like Jerry, he lived life king size - changing his cell phone twice a year, partying every weekend, vacation once a year and the likes.
His father would rant about the virtue of saving but Deven never bothered with it. But recent economic conditions have changed all that. His company lost three clients from the US in the last four months. There were at least 100 employees laid off and a few of them were Deven’s friends. Fortunately for Deven, he is still employed but he has no money in the bank. So, a concerned Deven resorted to his father for some mature tips on how to manage money.
A few things are common in both the cases:
- Spending outrageously
- Not saving for uncertainty
- Not ready for an economic slow down
If you identify with any of these, we give you tips on how to survive the slowdown. And we are not telling you to stop spending. The key is to spend, but intelligently.
To find out if you are spending intelligently, ask yourself these questions before spending:
1. Why am I buying this item?
Restrict buying to primary needs.
2. Can I find an alternate item?
If you lose a mobile phone, resort back to your older mobile which retired a year back. A new luxury car can wait for few years; go for a simple car with higher mileage efficiency.
3. Which is the best place to buy?
Sales and offers are always running at some or the other store in the city. Look for those stores; you can save 10 per cent to 50 per cent.
4. When to buy?
Timing is very crucial in buying. You can find big sales and bargains during Diwali and Christmas season.
5. Am I paying for a real value add?
Don’t become a spendthrift for the sake of convenience; always buy a item or service that adds value.
6. Make a list before going for shopping and stick to that
Don't buy more than what is required. Make a list and stick to it. Avoid paying for fancy packaging.
7. Negotiate before buying
Negotiate before buying. A mere 10 per cent savings of your new house can accommodate all your furniture expense.
Disclaimer: The contents of the article or are for information purpose only and are in no way meant to be advisory in nature. The author does not claim responsibility for actions taken by readers on the basis of the Article. Please consult your financial advisor for your personal money management.
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