All of us in IT industry including me earned huge salaries and we thought spending is easy. I moved to the concept of spend if your family needs. With change in economy, i want to relook at my life on some of the principles I used to follow on my spending, even before economic down turn. These can be applied by me and every one who read this.
Prioritize expenses Classify expenses as Luxury(avoidable), essential, necessity(unavoidable). Buying car is a luxury expense. Spending on mobile calls is essential expense, but we can make the call on landline and reduce the cost. Paying rent, electricity charges, income tax are necessary expenses.
Increase in number of dependents. Reduce the cost of your marriage and do not spend for luxuries after marriage. Buy a small TV, rather than Plasma TV
Payment of Loan or debt: if you are part of DINK or still single, you have money at hand and do not plan your EMI to more than 40% of an individual salaries. You may get married or there may be a kid and one of the couple would stop working and life would be tough. Increase in interest rates can also affect you badly.
Adapt to live with less money: Be ready for cut in salaries and start categorizing expenses. Go to the value for money restaurant instead of going to 5 Star restaurant
Emergencies: Be aware of emergencies like any hospitalization or aches that spoil your work productivity. Do regular exercises to keep you and your mind fit
Treat savings as expense: Please think that money you plan to save is an expense and do not reduce the savings to make sure you other expenses are met.
Make your partner/family the need for saving: Explain the family what is happening at work and what are the possible risks and how they can help you in these times. She might help you move to higher phone plan which would reduce your expenses as it provides more free calls which is what you used by your partner. She can agree to public transport, instead of sending car from work to home for her and calling car gain to pick up from work.
Watch Credit Card usage closely: Start looking close to credit card spending. identify expenses that would not have occurred if there was no credit card. if you do not pay credit card in full, start paying the credit card in full on the due date. if you already keep paying credit card in full, just for once try to clear all the dues and start fresh or use cash for a month and break the revolving credit