Budgeting Frugal Living Personal Finance Financial Advice Lifestyle Finance
Balaji Thotadri
Balaji Thotadri

@iam_balaji

25 tweets 9 reads Sep 09, 2022
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How I cut down my household expenses by 50%+ - Do read this thread. #personalfinance
Every family has a lifestyle which has been curated with habits that have been cultivated over years. A major part of increase in expenses over a period of time has lesser to do with 1/
increased cost of living and more with an increased standard of living which is an outcome of our lifestyle. Was thinking, are we as a family really cut out to toning down our lifestyle and live a basic frugal life in case we are faced with a job loss and not having adequately 2/
saved. We would be faced with a harsh reality of not spending as we normally do. How 2 push oneself out of the comfort zone and try to live out this phase was the idea which emanated from the thought.This experiment was done 3 years back pre covid.Ideating was the easier part; 3/
the tougher part was the discussion with the family – Wife and a 6-Year-old. Wife was easier, she whole heartedly supported (I am mainly the guy who binges). The conversation with my son was more long drawn as it went back to how we could do much simpler things in life without 4/
spending much. We tend to give in very easily to tantrums and excessive demands as a short-term fix. We also went to the extent of explaining the term austerity and the need for the same. Once it was decided we would go ahead with it, we decided to sync the 30-day period with 5/
my credit card cycle as our spends are 90% Card and 10% cash. The first step in this whole exercise is the baseline. It is always important that one tracks expenses incurred on a monthly level with the broad heads of expenditure.I classify my expenses into monthly recurring 6/
expenses and annual / quarterly / one-time expenses. The second bucket would include Vacations, School Fees, Insurance etc. I focussed only on operational expenses only. The focus of my reduction of expenses was monthly opex expenses. The biggest disadvantage in this exercise 7/
I see is that people expend a lot of money in cash – do not keep track of where this was spent. The advantage of spending on credit card is that it is easier to track heads of expenditure. I have an excel detailing spends for the past 11 years. In terms of saving money 8/
I believe that once one starts tracking expenses at this detail level – the very activity would enable a minimum of 10% saves just by looking at data of how much we spend on what. The credit card option is only for individuals who have the discipline of paying the card dues 9/
on time, and people who use Card as a convenient payment option for expenses which are anyways going to be incurred. I had advantage of tons of past data 2 leverage and took the average monthly opex expenses for the past 5 months. The baseline was set @ 1.30 Lakhs monthly for 10/
all my routine monthly expenses. Then did a 80/20 analysis of the same. 80% of the expenses were incurred in 20% of expense heads which were Restaurants, Groceries, Entertainment (including movies, gaming zones,Toys, Netflix,Tatasky & other digital media) & Clothes. The above 11/
constituted upto 65% of our average Monthly spend and were the controllables. The rest were routine expenses like Society Maintenance, Medical, Fuel expenses, Laundry, Electricity which were more of a necessity and a monthly fixed cost which did not spike irrationally. 12/
Restaurant Expenses - we decided to take a complete break from restaurants for 30 days. If at all we had an urge to go out & meet friends –it was either home cooked dinner either at our house or at our friends place. This was very difficult in the first weekend but we managed 13/
it at home and then it was more of repeating the same habit over the next 3 weekends. The second piece was – Lunch on a daily basis at work was Swiggy. This was also moved to complete home cooked food daily for the month. The third big part was the snacking at home – Swiggy 14/
post dinner eats and other stuff. This was also curtailed to zero. The positive side effect of the move was a healthier body over past 30 days.
Groceries – We tend to have a habit of going to the mart and picking up stuff on display rather than the old conventional model 15/
of going to a Kirana with a list of items needed. It was also multiple visits to the Mart say like 5 to 6 times, during which we end up buying much more than what we actually needed. We replaced that with online grocery shopping. Did a detailed search for what we wanted 16/
& added to list rather than browsing what is available. This was a large behavioral change which needed to happen.
Entertainment: This was the biggest head of expenditure which would hit my kid more than the rest as he was used to going out twice every weekend. Every trip 17/
entailed a movie in a VIP Screen (Lounge Seats), a visit to the gaming zone. There was conscious call taken not 2 go to malls at all – we had to nip the expense at the bud, so as not to give in to the temptation. That left us with the question of how to keep the child engaged 18/
and that too with stuff he might enjoy. Started taking him to swimming to the local club house (free of cost) which was something he enjoyed. Taught him to play carrom in the same club house. My son wanted to break his piggy bank and buy something from ‘his’ money. Taught him 19/
the concept that it does not matter whose money is being spent and we don’t believe anything is ‘mine’ & everything is ‘ours’. Movies –we decided that we would avoid going to the VIP screens wherein tickets cost 800+bucks a piece and watch only if a good movie was released 20/
in a normal theater. We did book for a movie – 3 tickets – morning show @ 500 Bucks for 3 (after my credit card discount - our only visit to the mall in the month.Tatasky –a normal full month subscription of all channels was upwards of 1500+ per TV and additional subscription 21/
charges for 2 more rooms paid for annually. Deactivated all rooms and retained only for one room in which we watch TV, with a base package, as we have moved over to Netfilx and Amazon prime and were hardly using Tata Sky – but subscription was still on, got down monthly 22/
cost to Rs 500 with tata sky –small save but it did matter.
Clothes – This was the final discretionary spend which was completely avoided –specially with Diwali round the corner. This was an easier kill compared to the rest.
Overall the lesson learnt at the end of the month 23/
was that the baseline need not be as high as 1.3L or as low as the actual 52K.Even if we added a restaurant visit a week and some entertainment – we would increase expenses by another 25K. The positives far outweighed the negatives, more quality time spent at home, pleasures 24/
in smaller things in life appreciated much more. Do read and share if this resonated with you. Please do follow me @iam_balaji for more of such threads on #personalfinance @KirtanShahCFP @connectgurmeet @Least_ordinary @itsTarH @FI_InvestIndia @SejalSud @aditya_kondawar

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