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Reduce your expenses: here are some tips

January 28, 2009

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
n 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….


Finance for Non finance Managers: Seminar!

November 4, 2008

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 (in Feb and March 2010 at Vashi and Andheri).


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 or you can call her at 091-22-67231091


September 8, 2008

Hi have just shifted all the posts to

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

Falling oil prices: good news or bad news?

September 3, 2008

Oil prices have fallen – from a high of $ 150 to a nice $ 105! However if prices have fallen because there is a slow down in the world economy, is it a good news?

Most people will not be able to decide on whether it is a good news or a bad news! However on the day the oil prices fall, if the market goes up, MEDIa will “connect” the two events. However, media is capable of connecting any 2 events! So beware. There is a “good” and a “bad” to oil prices. Learn to read events not reported in the media.

For e.g when oil prices go up media is likely to tell you that Hotels, airlines, etc. will suffer. However did they every carry a story saying (say in 2006) that since oil prices are low, hotels will benefit, NO. No chance – so please learn to “read” stories not written by the media.

Invite for a short seminar on Financial planning….

August 30, 2008

I will be doing a series of short “Why Management should be interested in Personal Financial Well-being of their employees – an Introduction to financial planning” seminars in the following locations on the following dates. This is being sponsored by myiris plus – a revolutionary personal finance software.

This is open only to Head of HR, Head of Finance or CEOs of mid to large corporates. Typical corporates we are looking for will have at least 200 employees.

For attending these in your town please send a mail to:

1) Hyderabad 10th September 2008

2) Delhi 25th September 2008

3) Mumbai 15th October 2008

4) Bangalore 12th November 2008

5) Kochi 26th November 2008

6) Ahmedabad 7th January 2009

7) Chandigarh 11th Febuary 2009

8) Pune 25th Febuary 2009

Only online registration. Limited seats, and your invitation will have the details of venue, timing, etc.

Getting out of debt is a slow process

August 14, 2008

Many things in life are better achieved slowly if you want the gain to be permanent! Does this remind you of another boring task – the process of losing weight? If so, welcome!

Investing and money management is a lot like eating. So is losing debt like dieting? maybe…maybe not. Is getting out of debt a little like going to a gym? Well maybe…maybe not.

However getting out of debt is also a slow process. You first need to analyse what got you there first. You were not born obese or born in debt. If you did get into debt, it was slowly. You bought yourself an item far beyond your monthly “can i afford it” . Instead of saying “I will save for it” you decided to buy it. Then it was a night out at a disco. You thought it will cost you (and your partner) Rs. 8k for the night out, but it just cost a lil more – 12k went to the card. Then you got a raise. So the car changed from a Santro to a Lancer. Never mind it gives only 4km to a litre – the fuel went to the card. Suddenly on a 6L ctc you were paying 20k rent, car emi, 2 nights out , the latest Nokia was too good to be missed. Hey bingo you now had a debt of 82k!

How to come out of it? Well many of the kids I meet these days just raid BANK PAPA and tell themselves they will never do this. NO that is not a solution. First stop the bad habits – buy what you can afford to pay cash. Carry cash rather than card – for many people it hurts to see cash go – signing is much easier. Then start leaving the credit card at home. If possible shift to a zero transfer charge, new card. Start repaying at least 2-3 times what the card company says is “MINIMUM AMT TO BE PAID”. In case you get a bonus, commission, gift, etc. do a lumpsum payment. If you are not so disciplined, cut up the card and throw it away.

Once you have controlled the spending habits, cut up the card, and made the payments make sure you stick to the new found habits.

Equity research: basic stuff

August 12, 2008

Financial analysts try to determine the value of a stock by calculating a company’s discounted “free cash flow”. This is based on a series of computer models with assumptions about future sales, earnings and growth rates. These models are only as good as the programmers and analysts that build them.

What you end up with is a highly subjective number about the growth of the company’s business and other performance measures. It’s little more than an educated guess. Moreover by the time the report comes to your hand it has gone to all the “news’ and “business” channels. After that you know how useful that report is, do you not?

So if following analyst reports isn’t the answer, what should we look at?

  • Cash Balances and Debt
    When the economy turns down, the highly leveraged firms are the ones that get in trouble first. This is part of the problem for GM and Ford right now, and it was the problem with Bear Stearns. In Indian conditions the amount of leverage is not so high. However a lot of foreign debt has been “hidden” as PE. We have no clue how much of this will hit us one the conditions worsen. If you have large debts, the interest payments alone are a constant drain. On the other hand, a company like TCS – with large stores of cash and no debt – can weather any storm. However you may have to worry about Tata Motors. Amazingly, sometimes a firm’s stock price won’t adequately value the cash it holds. This is because analysts do not understand the importance of cash in a bear market.
  • Cash Flow
    The market will – over time – value cash flow in similar ways. Look for times when the market undervalues a company’s cash by finding out how much cash a company is producing today. Cash flow is the lifeblood of a company. 2 great examples are Coromandel fertilizer and EID Parry. You can reasonably expect that analysts who look for sex appeal in shares will appreciate the value of free cash flow in the future, even if the firm is out of favor today. Therefore, keep track of the cash a firm generates.
  • Dividends
    Analysts at least in Indian conditions do not value dividends very highly. This is patently stupid. Given the quality of Indian reporting, dividends should be valued very, very highly. EPS is just an opinion, dividends are a reality. Reinvested dividends have contributed a big part of the total return. Favor a stock with dividends for this very reason. You’ll get paid to hold a stock while the market takes time to recognize its value.

These three simple guides have worked wonders when analyzing many different stocks.

Many of today’s stocks show large differences between their price and their historical earnings ratios. You may find the market is incorrectly valuing many companies in relation to their cash balances and its ability to generate cash flow and dividends.

So instead of listening to analysts, do your own research and ask the right questions, like these:

Can the company rebound to its historic price-to-earnings ratio?

Is the market undervaluing a company?

Can it continue to generate healthy cash flow and earnings?

Will it be able to pay dividends and interest payments on debt?

In short, cash and cash flow can be a more reliable predictor of the future of a company’s stock price than your gut… and especially an analyst’s educated guess. Especially if he is peddling his wares “free” in the pink papers or the idiot box. Use your brains.