Smart consumption: Five tips for smart spending and saving habits
January 12, 2021 1:15 AM
Everyone has limited resources to spend, and to reorient oneself, there is a need to change certain consumption habits. So curtail unnecessary expenses, invest in your health and save money for the essentials
As eliminating all spending on want items still feels extreme, one can start with the ‘one in and one out’ rule.
By P Saravanan & Parijat Lanke
Although the year 2020 did not given us many good memories to cherish, it taught us one thing, and that is to be more mindful of how we conduct ourselves, including our consumption patterns. Certain habits inculcated among the investors during the past year should continue for some more time.
Think twice before shopping With the lockdown imposed across the nation, people were forced to give up their habitual shopping spree plans. Losing that exciting rush of running from one shop to another made us calmer and more thoughtful on our purchases. This habit of thinking twice before we shop helps to reduce over-consumption and escalation of wants.
One in and one out As eliminating all spending on want items still feels extreme, one can start with the ‘one in and one out’ rule. Before buying a new item, such as a dress, couch or car, you should ideally sell an old dress or trade in your current car or post your couch on second-hand goods buy/sell websites. Make it a point that for every non-essential item that you buy, get rid of one similar non-essential item as well. In this process, you will not only save your money, but also feel less guilty.
Curtail unnecessary subscriptions and memberships If you pay any attention to your credit card / bank statement, you would probably notice certain items such as cable or satellite TV subscription, high-priced mobile plans, streaming services, digital newspapers, etc. All put together, these make a sizeable dent in your net income. So, consider each and every item and take a call whether it is worth the money that you are paying.
Saving for the future With job losses and pay cuts across sectors, every working individual was apprehensive. This was an unanticipated situation for the firms as well as the employees, which forced everyone to hit the brakes on spending. People, especially those who belong to Generation Z, are now more attentive to what and where they spend their hard-earned salary / income. Consumption is now more informed, and thought-through, to save for such future contingencies.
Caring for self The pandemic period made everyone realise the importance of health. Caring for self is one of the key elements in minimalist living. This has reoriented the focus from spending on unnecessary items to health-related products and services. Everyone has limited resources to spend, and to reorient oneself, there is a need to pay attention to the consumption habits and change them. This reorientation towards investing in health and health related products and services would prove beneficial in the long run.
To conclude, being frugal is not the same thing as being cheap. Investors should note that by living frugally, one can maximise one’s income and minimise spending to have the biggest possible impact on one’s finances.
The habit of thinking twice before we shop helps to reduce over-consumption and escalation of wants
Make it a point that for every non-essential item that you buy, you get rid of one similar non-essential item as well
TV subscription, mobile plans, streaming services, digital newspapers add up to a sizeable expenditure. Check if you really need and use them
Save for contingencies such as job loss and pay cuts
Spending on health and health-related products is caring for the self
P. Saravanan is professor of finance and accounting and Parijat Lanke is a doctoral candidate, IIM Tiruchirappalli