How to reduce your cost of living

The basic needs of man are food, clothing, shelter and circus (entertainment?). However, most of us have today graduated from needs to wants and luxuries.

However, when the headline inflation numbers hit 11.9% there is a serious worry about people not being able to meet even their basic needs – and that is a worry.

While shopping at a discount store instead of the mall generally takes care of the clothing issue, and living in a small apartment instead of a huge house, if you can live in a less fashionable area – like Vikhroli instead of Powai, can address your housing situation. Rising world food prices can lead to some significant challenges in the food department!

Everything from rising transportation costs to the development of biofuels, push up the cost of food and put a pinch on consumers’ wallets.

While reducing your eating to one meal a day is good for yogi’s and is a good way to cut down costs, that is not what I am suggesting. Instead, I am suggesting something much simpler.

1. Eat at Home
Eating out is expensive. Apart from food even coffee made at home is inexpensive. And you get the added benefits of nutrition, hygiene, etc. Small numbers do add up – if you are spending Rs. 200 a day eating out, and it costs you Rs. 50 to eat at home – you save Rs. 150 a day. A systematic investment plan of Rs. 150 a day done for 30 years can give you returns in excess of 5 CRORES! Toast butter, vegetable sandwich, Tea, coffee, curd rice, salads – are really simple to make

2. Know what you are buying
You need a plan for almost anything you do! Shopping is not very different – if you stumble around the grocery store and fill your cart with everything that catches your eye, chances are you will spend a lot more money that you needed to spend. Plan your meals for the week ahead, and make careful note of what you need to buy. Once the list is made, purchase only the items on the list, and avoid impulse buys.

3. Buy what you need and then put on Blinders!

Stores are designed to make you go through a long walk to get to the most basic items you need. ON the way you will pick up a lot of things that you do not need, and in quantities that you do not need. Though there is no research in Indian conditions, clearly people do not use all the things that they buy – refuse to be bullied into buying! Most necessities and basic cooking items are found along the outside perimeter of the store, start there and work your way around the edge of the store.

4. Shop on a full stomach

On a hungry stomach you are likely to pick up a lot of things that look like food! You might also pick up a lot of food – which is perhaps un-necessary. On a full stomach on the other hand, you will most likely
be tense and pick up unnecessary stuff.
6. Do you really need bottled water?

A water filter works far cheaper, compared to bottled water in terms of costs.

7. Shop sans the Kids
Hungry, tired, cranky kids increase the amount of time it takes to get your shopping done. Kids can really bug you into buying things which are bad for your health and for your purse – leave the kids at home / crèche / school before you venture out shopping.

8. Buy in Bulk
Bulk buying can save you a significant amount of money. Pay attention to the prices and pick up the family size package if the per-unit cost is lower and you have a place to store it. However, you need to realize that bulk buying has a dark side too! If you are not a big user of any particular product, and storage is an issue be careful of bulk buying – the Indian weather does require refrigerators for most products.

9. Use Store Reward Cards
If the store that you visit most frequently has a reward card, sign up. In some cases, stores raise their prices when they offer reward cards, and without the card your bill will certainly be higher. If the reward card offers other benefits, such as a preferred (or free) parking, some free schemes, etc. be sure to maximize your benefits before they expire.

10. Buy Local products
Whenever I step into a big branded store, they do try to push “American grapes” – I fell for it once, and realized only on billing that it was Rs. 400 a kg! The Indian variety is normally available for Rs. 40. Locally grown or produced food is often available at a cheaper price because you don’t pay for long transportation costs. In the place I live I also see farmers coming and holding an exhibition / sale of seasonal vegetables and fruits – common to see a mango mela or a fruit and vegetable exhibition. You cannot do your weekly purchase here but you get a good price indication.

11. Choose unbranded goods!

There is a huge, huge cost difference between a branded product and an unbranded one. Even in case of “expensive” items like dry-fruits if you buy it from a wholesale-retail shop you will find a 20% price difference. Some branded foods like cornflakes, hold your breath – are more expensive than dry fruits on a per kilogram basis J. If you thought potatoes were selling at Rs. 12 a kg., you are correct, but when it gets converted to branded chips, it becomes a little expensive – about Rs. 300 a kg!

12. Men are bad shoppers?
It is not so much a gender issue – but men do not have much patience and that shows while shopping. So if you are a man, realize that shops know and understand this. So things are arranged in such a way that when you are in a hurry you will find the most expensive items. So look in the corners, look at levels lower (and higher) than just at the eye level. To find less expensive items, look down. Also, looking around your brand-name food can find you a cheaper generic alternative.

13. Avoid Checkout Temptations

Normally you have some high priced crackers, chocolates, shaving blades – and the cheaper alternatives are just a little further away, so walk a few steps. Picking up things at the check-out counter surely spoils your health – like the chocolate that you eat on the way to the car! Most of the times it also spoils your wealth.

14. Compare Prices and Stores
I personally do not compare prices and stores but my wife has a doctorate in this! She knows which shop is good to buy vegetables, which shop for branded goods, and which shop for unbranded goods. And she plans her shopping accordingly.

15. Sales offers
In Indian conditions September to December are what we call “Festive season” when most of the buying happens. Surprisingly, Hindus, Muslims and Christians have some festivals for which they buy new clothes in this period. So shop keepers do a pre-festive sale in July-August and a post-festive offer in January. Use these sales to build your wardrobe – you can get good deals.

16. Shop less frequently
The lesser the number of trips you make to the shop, the lesser the things you will end up buying! So if you are making more trips to the store, it is time you reduced the trips.

17. Pay In Cash

When you buy your day-to-day requirements with your credit card, and do not pay off in full, you pay interest. Apart from this, when you see cash go out of your hand, you tend to be more careful about how much you spend. So paying by cash is a good option.

18. Check Your Bill
You should check all the statements which have a financial implication – whether it is your credit card statement, you mutual fund statement, your bank statement, your insurance statement or even your bill at the Store where you buy. Scanners are fine, but sometimes there could be a mistake. There could be one item scanned twice. Sometimes the prices are not changed – maybe carelessly but you MUST see the bill before you pay. Or go home, check and then scream if things are wrong.

19. Buy leather goods in monsoon and umbrellas in Winter!

During the non-season prices of goods are lesser. If you are in a monsoon area check out for sale of leather goods. There must be one going on somewhere near your office / house. Be alert to such offers. If you are buying things for your kids this is more true. So be awake.

Keep watching this space, i will keep adding points here….

I do workshops on “Finance for Non finance Managers” – have done sessions in Mumbai, Pune, Chennai, New Delhi, Bangalore…and have had a good response from people as diverse as a CEO to a Senior Manager.

Am doing a session in Mumbai (on December, 5 and 6).

wHO SHOULD ATTEND?

Well if you need to understand your business, do you not need to understand how it looks on paper? So if you are a sales guy who should attend the importance of collections, HR who should understand constucting the “cost to the company”, the materials manager who should understand the need for efficient working capital management, you should attend. If you are the CEO, or the person liasioning with the JV partners, you are welcome…

just drop a mail to lavanya.iyengar@irisinida.net or you can call her at 091-22-67231075

Hi have just shifted all the posts to www.subramoney.com

Simple stuff – just click on the url and you will be redirected…

Bihar Flood Relief

Bihar has been hit by a terrible flood. It is one of the worst disasters to strike the country. It is worse than the Tsunami, worse than the Gujarat Earthquake. Several million people have been affected. Entire districts – villages and towns – have been washed away. The number of people dead is not even known.

There are over 6 lakh people living in 200 relief camps. In Saharsa district alone there are 2 Lakh people in 68 relief camps. Similar numbers are living in camps in Madhepura, Supaul, Araria, Purnia and Katihar districts. And many more (those who are better off and have relatives and friends outside) have fled these districts.

This is NOT the usual Bihar flooding. Usually the Kosi river overflows its banks and floods the villages nearby. The people in these villages are prepared for it.

This year, the Kosi completely changed course – sweeping across several districts. Thousands of villages that never had experienced flooding before are now submerged in water. The people living there were completely taken by surprise. Many have died. Others have lost everything – they are without clothes, food, homes, money.

The scale of the disaster is much bigger than the Tsunami. But because it is Bihar and people think this is like the usual annual flooding, there has been very little coverage of the flooding and very little support pouring in for relief. There is an urgent need to inform people about the nature of this disaster and to mobilize support.

For a week now, AID INDIA’s Bihar team has been on the field organizing rescue and relief efforts in the affected districts. So far we have been able to organize some rescue operations and have provided food, milk for children, and medical support for children in several camps. But this is not enough – the scale of the disaster is very large and the need is a lot more. Pratham teams in Bihar have also started working with us and we will now be scaling up the relief efforts significantly.

After the initial shock, the government has been taking a lot of steps to organize rescue and relief operations. The army has rescued people from most of the places. The immediate focus needs to be on food, clothing and health needs of the people in relief camps. Some food is being provided at the camps – but there is a severe shortage and lot of rioting to get at the food. Children are the most affected.

Our immediate focus is on children – there are about 2 lakh children in all the camps. Milk, biscuits and food for children is the first priority now. We are trying to ensure that milk and food reaches all the children in all the relief camps.

The second need is clothes. Most people left their homes with what they were wearing. We need children’s clothes, saris for women, undergarments, lungis and lots of blankets. Disease outbreaks are becoming a serious threat and we need medicines.

After the immediate phase, the need will be to focus on health, education, shelter and livelihood needs. But at present, given the scale of the problem, getting past the immediate relief and survival needs are the most critical issues to address.

AID INDIA and Pratham field teams need a lot of support at this time. We need:

1. Funds: You can donate online at www.eurekachild.org/biharflood or you can send a check payable to AID INDIA (mention Bihar Flood Relief) to:

AID INDIA

Post Box No: 4903, Gopalapuram, Chennai – 600086, India.

Phone: +91-44-42636125/ 28350403

1. Food: Milk Powder and Biscuits

1. Clothes: Children’s clothes, saris, lungis and blankets

1. Volunteers: To raise awareness and mobilize support, help with collection and packaging. We also need volunteers to work with our relief teams at the field (but for that you must spend at least 10 days in the affected areas and must be very healthy and ready to work in difficult circumstances.)

To keep everyone updated on what’s happening at the field level, we have set up a separate website for the relief efforts:

www.eurekachild.org/biharflood

Please direct your friends and others you know to this site. We will keep posting new updates, reports, photos and other information from the field at this site.

For more information please contact: eurekachild@gmail.com or

Chandra: +91-97909-20752(chanvish@yahoo.com)

Prabha: +91-98403-51132 (prabha.balaraman@gmail.com)

]]> http://subramoney.wordpress.com/2008/09/08/bihar-flood-relief/feed/ 1 subra1221 http://subramoney.wordpress.com/2008/09/04/doctors-retirement/ http://subramoney.wordpress.com/2008/09/04/doctors-retirement/#comments Thu, 04 Sep 2008 02:17:50 +0000 subra1221 http://subramoney.wordpress.com/?p=475 ]]>

How can a Doc retire early?

Docs start earning quite late in life – at least the big bucks come at a late stage. So is it really possible for a Doc to retire early?

It really looks difficult. Docs unless they are super specialized and have created some kind of aura about their capabilities do not really earn the mega bucks of sports star or a film star. However, they do have a lot of flexibility in their profession. They can be on their own, be in a partnership or grow it like Dr. Reddy of Apollo Hospitals.

Having established that it is a good idea to retire early, and to never stop, how does one go about doing this?

Investing early and well, normally means the doc can retire early and well. If things are done properly then by, say, age 55, or whenever the kids are coming off the doc’s financial hands, the income from investing starts to exceed the income from the practice. This is a great position to be in, particularly if the income consists largely of unrealized, and hence un-taxed, capital gains. Also given our current tax structure where there is no INCOME TAX on dividends, the doc may be in a good position to retire.

Interestingly, most docs continue to practice even when they are at this point. But thankfully they can skip the long hours, choose lesser locations, and work more sensibly. They can also decide to and take many more holidays and long weekends. And there is a huge difference between the doc driving to work because she wants to, and the doc driving to work because she has to. One is happier than the other.

The major issue here relates to the costs of general practice. Unfortunately Docs do not have much training in considering Fixed Costs, Variable Costs and Marginal Costs! Not all costs fall just because the doc is doing fewer sessions. Many costs, for example, rent, some wages, depreciation of equipment and so on, stay the same regardless of how many sessions are completed each week. These costs are called “fixed costs”. This is because they

are fixed irrespective of how many sessions are completed each week. It is also called a Period Cost. At the end of the period, the cost has to be paid – immaterial of whether the equipment or place got used. A common mistake is to assume that there are no fixed costs. A doc completing, say, 7 sessions a week (only Mornings) and making Rs.15,00,000 a year may reason that his income will fall to, say, Rs.950,000 if he cuts from 12 sessions a week. Sadly this is not so. More probably, because fixed costs stay the same, profit falls by much more than this, say down to Rs.700,000, if not less.

How can he avoid this? There may be some options which he can consider:

1. He may start teaching at a Medical college including doing sessions on how to handle customer psychology. Lady docs are sometimes preferred because of better soft skills.
2. The doc can stop practising solo or in a group practice where costs are shared equally irrespective of the number of sessions.
3. The doc should try to change to a practice structure where all costs (or virtually all costs) are variable costs not fixed costs.
4. The doc can join a friend who has similar ideas and become a partner. One of them could used the infrastructure in the morning and the other person in the evening.
5. The doc could also get into an arrangement with 2-3 junior docs who will use the geography of his practice are – and split the fees.
6. One more alternative is to sell a portion of his practice to a deserving junior and get into a fee sharing arrangement.

Many of these arrangements may look difficult, and in many cases involves the DOC selling all or part of the practice to younger Docs. In at least one case I know the doc used his practice till his age of 81, but sadly many of his customers had gone away. He had to just sell his premises to a dentist. The practice fetched him nothing. Surely retirements could have been better planned.

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