Generally, there are two sections of people who throng the arena of personal finance. One section skimps and saves to achieve financial success, while the other scoffs at scrimping and pockets big wins. In truth, both are right in their own sense.
Taking steps like securing discount coupons, saving electricity etc. will eventually lead to bigger rewards in return as a parsimonious lifestyle indicates reaching financial freedom sooner or later. Conversely, the ‘big wins’ section puts forth a credible point too. Instead of focusing on small steps that are easier to take and don’t necessitate real sacrifices, people can improve their monthly earnings by pulling off a big win, which will probably fetch more than what they make by saving on thrifty things.
By and large, there are four approaches to trim down expenses and improve your income. Some of them may yield better returns than the rest while some are less complicated than others. Different people obtain different results by following the below listed approaches:
- Taxing actions that yield small returns: It includes toiling in time-consuming laborious jobs like door-to-door selling, building furniture, etc. They can be easily termed as pyrrhic gains.
- Taxing actions that yield modest returns: Actions like changing careers and moving to a low-cost accommodation in a cheaper town yield huge returns but they demand a lot of effort and time. Such ongoing tasks can include selling collectibles or obtaining a new diploma.
- Quick actions that yield small returns: These include fundamental actions of personal finance that amount to meagre gains on a daily basis. The professionals can work overtime; scholars can participate in research programs while others can reduce spending by cashing on coupons, purchasing stuff from thrift stores, using public library and growing a garden.
- Quick actions that yield big returns: According to one section of financial experts, these are the actions that should be pursued strongly. This approach towards big wins comprise negotiating salary, cutting back transportation costs, diminishing recurring expenses, and scaling down accommodation expense. These actions might take minutes or a matter of days but reap the maximum pay offs.
It becomes evident from above classification that investing in big wins is the most excellent way to perk up financial condition. If you wish to Achieve Big Wins, follow these steps to your way to financial victory:
Housing forms the largest expense for the majority of people. A typical household expends one third of their income on housing, which comprises loan or rent, insurance, maintenance, interest, and facilities. Ideally, slashing down your lodging expense by moving to an affordable house in a town and lowering your cost of living might yield huge financial returns but it doesn’t fall in the ‘big win’ category in the real world. However, there are simpler ways to trim down your living costs.
The foremost step (and the most taxing step) would be to leave your rented accommodation or sell your home to move to a more affordable house in your current town. Take for instance, a person who earns INR 20, 00,000 a year expends roughly INR 25,000 on housing every month. Reducing that by 10% will result in savings of nearly INR 2,500 a month. Reducing the housing expense by 30% would mean saving INR 90,000 a year. That’s huge!
Transportation forms the second-largest segment of the budget. A person spends roughly INR 10,000 a month on an average on travelling, automobile payments, fuel, insurance, and maintenance. People are fond of their vehicles and are reluctant to make any compromises when it comes to transportation. But simple ways can help cut down transport costs to half. Read on:
- Replace your current vehicle with a used one. Ensure that it is fuel efficient. Additionally, you will incur less cost on insurance of the second hand vehicle.
- Instead of driving your vehicle, use public transportation. Drive only when it is necessary.
- Walk or cycle your way to your office or destination. This will keep you fit and save your fitness expenses too!
Usually, people loath making adjustments to the way they travel. But, instead of searching for reasons for not doing something, seek ways to make it happen. After all, it means saving lots of money.
On an average, accommodation and transportation collectively chomp through half of the monthly budget. After considering the multiple opportunities to scrimp and save on these two expenses, you are still left with numerous other areas to pocket big wins. Beginning with, the average annual household spending on clothes, health care, entertainment and food vary from one family to another. Different people have different spending habits and thus, opportunities to pull off big wins vary from one person to another. You can track your spending over the past year to understand the areas where you splurged. There can be travel expenses that could have done with a little economizing. In this way, you can identify the areas where you can save in the coming year and rather invest in other goals or skill training. Examining your spending behaviour can help reflect on the expenses to curb and finally seek big wins.
Having said that it is great to trim your expenditure, you can merely cut the budget to this point. What about the earning potential? Hypothetically, it is limitless. Then, why not harness it. If anyone dreams of becoming rich, gradually or otherwise, then they have to start making more money. Akin to spending, some techniques to surge your income may offer big wins while a few may not. Look at the two smart ways to make a difference to your income:
- Salary negotiation: Touted at the ideal way to boost your earnings, you can exploit the opportunity of salary negotiation when you are hired or at the time of a performance appraisal. For many of us, salary negotiation may be a scary prospect but the few minutes where you can demand for an increased income can make a huge difference over your career. It may be to the tune of tens or even hundreds of thousands of rupees. Now, that’s big, isn’t it!
- Go for an additional job: Working in your free time is a smart way to increase your cash flow. Almost everybody can take up another job to rake in extra bucks. Few people might abstain from the thought of taking up a second job as it feels inferior, or think it is impossible considering lack of time and competitive job market. On the other hand, several people who go for a second job vouch that it involves smaller risk and preparation as compared to the majority of other income-enhancing strategies. Moreover, the second job is less likely to bring stress that usually accompanies your primary job.
Additional ways to fire up your income scale may be obtaining better degrees, initiating a part time business, or renting out the extra space of your housing. However, these methods may consume a lot of time and energy. Instead, look for a second job. Maybe you get hired in the coming week and start earning extra money. Negotiate your salary when you appear for the interview next time or during the performance appraisal. These are smart and quick ways to race towards your financial goals. Both these methods can provide the much needed thrust to your income for the least of effort.
It would be wrong to suggest that working door-to-door jobs or building furniture cannot help earn money. But it would be incorrect to believe that these actions can make you rich. Put these actions in their right place and consider that these activities are meant as a means to earn but not thrive. You can never get out of a debt, if any, by pursuing such chores. Wouldn’t it be better to concentrate on things that are simpler to achieve and help garner greater returns? It brings us to the biggest hurdle between the average earning person and the big winner. No, it is not their ability. It is their approach towards achieving big wins. Lacking effort and sacrifice, you can never dream of getting closer to the smart financial portfolio. Though these steps can be tough to take, but they will surely inch you closer to your financial objectives. The moment you understand that these are not just fringe ideas, the sooner you will triumph over the debts and reach financial freedom.