Why Are You Always Broke?

You don’t need a financial expert to tell you that, just go through the following points and you will be sorted.

You spend more on things that you want and not what you need

That’s the basic problem with most of us who are always cribbing about how little we are paid. Most of the salary that we earn is spent on things that we really don’t need. You might want the new iPhone 5, but before spending 45K on it, ask yourself if you really need it. No matter how much you upgrade yourself to the new technology, what’s new today will become obsolete in a few months from now. If you avoid spontaneous buying, you’ll accumulate less crap at home, and save a lot of money.

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You don’t let other people pay for their drinks and food

Agreed you don’t like other people paying for your food or drinks, but that doesn’t mean it should be you who should always pay the bill. Alcohol costs a bomb, and even if you go out drinking twice a month, it can create a major dent in your financial budget. So let other people pay, or share the bill. Avoid going out with people who are always eager to drink, but never ready to pay.

Even though you have a cook at home, you’ll still eat outside

A lot of people do that but we don’t understand why. Agreed KFC serves awesome fried chicken, but do you realise how much money you waste on it? No matter how expensive vegetables get, homemade food will always remain the cheapest and the best bet. Try those dabbas that other people in your office call for and limit going out for lunch to once or max twice a week.

You are too worried about your neighbour upgrading his car

The show-off tendency is perfectly fine, but beyond a point you will have to understand that your neighbour buying a new car or a new flat doesn’t make you look like a poor chap. This mad competition will do you no good, so grow up before the complex ruins your financial stability. Remember the last time you upgraded your car, most of your neighbours were still driving their old car.

For you, credit card is free money

Credit cards give you a false sense of financial security, but the reality is that credit limits are nothing to take pride in. Firstly because they make you spend more than you can afford, and secondly because they coax you to indulge in spontaneous buying. So stop treating credit cards like free lunches. Think of those emails and texts that tell you about amazing deals on your credit card as a warning.

You don’t know your limits

If everyone had the money to buy a Mercedes, they would never have made a Tata Nano. It’s bitter but true that you can’t afford everything that you would want to buy, so it’s extremely important for your financial well-being that you know how much money you have, and how much you can spend after saving a few grand for those unexpected situations. Nothing wrong in stretching yourself once in a while, but if you do it regularly, you will be screwed one day.

You invest in things you don’t understand

Frankly, you will never understand every insurance policy or monthly investment plan that the lady on the call tries to sell to you to complete her monthly targets. You must invest in things that you understand, else these financial planners know a thousand ways to fool you without letting you get the slightest hint. Investment is the best use of your salary, but those who don’t do it right, land in trouble.

You don’t have a financial plan

You need to plan your budget well in advance in regards to rents, instalments, households and other expenditures, else chances of you being broke in the middle of the month increase. The idea of financial budgeting is just to make sure that you have enough money in your account when you need it. Maintain a daily expense diary and at every month end identify what expense could’ve been avoided.

You have rented a bigger house

A three room flat looks great, but do you really need such a big flat? That’s the question you must ask yourself before signing that rent agreement. Bigger houses don’t just come with an expensive rent tag, but maintaining them is also tough. Also, the maid will charge extra for cleaning those extra rooms. The money you save can always be used for something more useful. Instead of a three room flat, rent a bigger two room flat. It would more or less serve the purpose, and cost less.

From the December 2012 issue of FHM India.