Smart Girl’s Guide to avoiding unnecessary expenses

We put together an easy guide to help you steer clear of frivolous expenses and set realistic financial goals instead
How often have you decided to give in and purchase that overpriced cup of coffee, a beauty buy that you probably didn’t need, or spend time mindlessly scrolling on your phone only to make an impulse purchase? We’ve all been there at some point, and while it seems like a daunting task to reign in those frivolous spends and be financially prudent, we’ve got experts to help break it down for you. Take note of these easy-to-adopt habits and a list of how you can set aside money for an emergency fund, that much-awaited vacation, or enough to purchase a luxury handbag you’ve been eyeing.

Firstly, it’s important to identify where your money is going, especially when it comes to certain spends. Is it an online subscription that you’ve purchased but aren’t using? Or do you use multiple mobile payment apps where you’re unable to track your expenses? More often than not, we end up being lazy, not keeping an eye on where our money is going. This is one of the biggest challenges for most people.

According to Lisa Pallavi Barbora, personal finance coach and founder of Moneypuzzle, what people fail to acknowledge is that money is really an emotional tool. “When we are happy, we spend to celebrate, when we are bored, we spend on entertainment, when we are guilty, we spend to compensate, and so on. Our money gets drained because we are emotional beings and unable to control our impulses. This kind of spending is perhaps one of the biggest aggregate expenses,” she explains.

Dipshi Sharma, senior manager at Bengaluru-based PeakAlpha Investments points out that some of the most common money-draining habits are those that come from e-commerce and apps on the phone for clothes, food, groceries, and even accessories. “E-commerce sites and apps have made buying easy and most of the time, we shop owing to boredom. Retargeting ads are prompting us to buy things we are interested in, so the nudge to buy is all around us.” The best way to avoid this is to stick to a plan, she offers.

Use digital tools: Consider utilising technology to streamline the tracking process. Many apps and software can automatically import transactions from your bank accounts and credit cards. This can save time and reduce manual errors.

Review and analyse your expenses: Regularly review your tracked expenses to gain insights into your spending patterns. Look for areas where you may be overspending or find opportunities to save. Analysing your expenses will help you make informed decisions about your budget and identify areas where adjustments are needed.

BUDGET, BUDGET, BUDGET

Budgeting will go a long way in helping you control your expenses. Barbora suggests a one-time big budgeting exercise, putting down in minute detail where you are spending. “Make sub-heads like coffee, sports apparel, phone accessories and so on. This will give you an idea about where your money is going. You may find that a large chunk is getting spent mindlessly on something that’s not so important, doesn’t contribute much to the quality of your life, or doesn’t add towards your goals. Start tracking that expense closely.”

She adds that the only way to not spend is “to not spend”. Take one day at a time, identify the real reason behind your irrational spending, remove any temptations in your immediate environment, and work on moving in the opposite direction, advises Barbora.

INVESTMENTS ARE JUST AS IMPORTANT

If you’re looking to streamline your expenses, Sharma suggests automating payments. “Money should first go towards Systematic Investment Plans (SIPs) and utilities within the first week or the 10th of every month. This way, you ensure that your money is debited towards the most important things— savings, utilities, and expenses like rent, salaries of staff, and so on.” She adds that anything else remaining in your account after essentials like food, clothing, medicines, and unforeseen expenses are paid for, can be used for discretionary expenses such as entertainment or dining out or put into a liquid fund.

Kapoor adds that it is often recommended to save three to six months’ worth of living expenses in an emergency fund. Ideally, aim to set aside at least 10 to 20 per cent of your salary toward building and maintaining an emergency fund until it reaches the desired level.

START OFF WITH EASY FINANCIAL GOALS

If you’re confused about where to begin, start with small steps. Once you’ve identified where your money is going and what can be saved, you can draw up your financial goals and allocate the money accordingly.

“Your financial goals could fall into two categories,” says Sharma. First, is to correct something wrong, like living beyond your means—such as a huge debt. Second, is to set positive goals that you work towards, like planning for your child’s education, a new apartment, or a secure retirement, she suggests.

“For the first, you need to identify the problem and take the help of a financial planner. If you have huge debts, work with your planner at decreasing it, while also building an emergency fund and health insurance, which is a must for everyone. For future goals, like building a house or children’s education, discuss this with a planner so they can put away money every month to build the required corpus for you,” says Sharma.

And if you’re simply taking baby steps towards wanting to control your expenses, Barbora suggests creating a piggy bank. “It can be a separate bank account or a physical one,” she offers, adding that you should have a goal of putting a small amount like ₹200 in that piggy bank every day. “Take it up as a challenge and if you miss one day, you have to add another ₹100 the following day. If you are able to do this for one month, you will have close to ₹6000 saved up. Do it for a year, and you’ll have ₹72,000.” Increase the challenge amount by 15 per cent in the next year and build your discipline. This way, you are preventing mindless spending and also saving at the same time, she says.

IN A NUTSHELL

Planning how you spend your money sounds complicated only until you do it, says Sharma. So, some simple tips include employing a filter before you click to spend. “Is it a need or a want? Do you have the wherewithal in your budget to buy it this month?”

Ask yourself these questions and pause before you spend. Once you’ve broken that cycle, it’s easier to keep a tab on your expenses. Barbora adds that ultimately, saving and investing is not so hard. “You must start early, automate the process, and keep it simple.”