Threshold of expenses

I’ve fond memories of a well spent childhood in our ancestral home built by my grandpa seventy years back. Among the many traditions followed, one I distinctly remember is the annual practice of getting a little bit of pocket money from elders during major church festivals. It was called ‘Perunnal Podi’. While my parents and relatives were generous with the amount, the experience was quite different when it came to getting the amount from my grandpa.

I learned a lot on negotiation skills and bargaining to say the least during these times. Most often it ended up with a win-win situation since I was the only one in the family who was successful in getting whatever amounts I managed from my grandpa. Though the effort didn’t justify the result, getting two Rupees from him was hailed as one of the greatest achievements in my life. Do note that this was a considerable amount for a school going kid especially when you know the fact that these were the times when a mint flavoured candy costed just five Paisa!

Born in 1913, less than a year before World War One started and having lived a blessed life of more than a century, my grandpa has literally seen it all! He had been through both the World Wars and more importantly the great depression of 1930s. Add to this, his father’s untimely death while my grandpa was just a fifteen year old teenager left him in charge of a large family with two recently married sisters and two younger brothers. They had a thriving business with a favourable-on-books financial status where people owed them double the amount of money than the debts they had. But the economic depression broke everyone’s back and many of them couldn’t pay back the amounts owed which forced by grandpa to sell some of his properties and settle his own debts.

This entire experience taught him the value of every single Rupee and that was quite evident in all of his transactions. He literally had an iron grip on his expenses to put it in the nicest possible manner. He used to remind us to be diligent in our expenses each time we ask for money or plan to spend them. This was supplemented with his lifestyle where he hardly created any arena for spending money unnecessarily. He took bare minimum risks when it came to investments and had a strong preference to lead a debt-free life which obviously made him quite comfortable when he hit the bed every night.

Planning the threshold or limits of your expenses is quite a personal decision for each one of us. We could either choose to spend a lot and still be within our budget or could spend a little and save the rest for future investments. Nevertheless there are certain factors to be considered while taking decisions on investments especially the ones that require you to spend from your future income. When you plan the payment for an investment as EMIs you need to ensure that you clearly have an understanding of your income so that the EMIs along with your other expenses don’t leave you high and dry.

If we take a quick stock of the categories of our expenses for a month, some of us could be in for a shock. We might be spending a lot more than we should on certain types of expenses. Be it our shopping or eating out expenses or any other category, we ourselves are the best judges to answer this simple question, ‘Should we be spending so much on this category’?

When you effectively supplement the answer to this question with a planned amount to be spend for that category every month, you’ve already taken your first steps for better planning of your hard earned money. What could be a pleasant surprise is the fact that introducing these checks alone will be enough for you to meet all of your planned expenses and even leave you with an amount as savings.

Once you have optimized your spending limits by applying this check for all your categories of expenses all you need to ensure is that this pattern is followed in your life. Then comes the next logical step. What can be done to increase your income? While for some people both these acts can go in parallel, for others it might be worthwhile to put the checks on the expense first before exploring the options to increase the income. We’ll possibly talk about this some other time.

May you be empowered with the first step to get the threshold of your expenses right and lead a more fruitful and fulfilling life!

God bless.