

While the first rule was Earn More This is the second rule of personal finance part of the series 5 Universal Golden Rules of Personal Finance.

2. Live Economically : For many people “ECONOMICALLY” is a 12 letter word for cheap. They believe if you are living economically you are wearing patched clothes, driving rusted vehicles and other such things. But let me tell you that these very people who live economically usually are the ones with mountains of cash in the bank. Why because they spend less than what they earn and use the difference to pay off debt, save and invest. These are the people who know that less you spend less you need to earn. So they are the one who can retire the earliest, do things that they like and so have better chances of succeeding in life.

I know what I am going to hear in the comments I have no life. This is boring. I might as well live in a box. You have to enjoy life sometimes. But believe me enjoyment in life does not always come from spending money. It comes from spending time with your family and friends.

Here is a list of some of the rules which can ensure that you are able to reduce your expenses.

1. Maximize every Rupee: Every time you spend , you are making a decision. You decide that whatever you are paying is it worth it. Do you actually need this thing.

Some-times the decision of not buying altogether is the most prudent one, or buying the cheaper version or doing a task yourself makes more sense. Here are some ways we can maximize the money we spend.

a. Go for one Car.

b. Rent rather than buy.

c. Look for used first

d. Eat out less

e. Carry your lunch to work

f. Adopt a minimalist wardrobe

g. Stop online impulse buys

h. Find free entertainment

i. Exercise Economically: A morning walk or jogging in the park is as good as the expensive gymn.

j. Stay Healthy

k. Walk

l. Quit Smoking

m. Drink Water: We drink lots of calories by consuming Soft Drinks, Colas, Coffee etc and pay for them also. Water is calorie free and does not cost much.

n. Stop Using Credit Cards

o. Do it yourself

p. Stop paying interest

q. Maintain your possessions

r. Save Energy

s. Buy clothes in sale for the next season

Well this list is not comprehensive but these are some examples of maximizing the money you spend.

2. Measure where your money goes: Spend sometimes to analyze your daily routine to look for things that make you spend money and ask yourself are they necessary or could they be replaced. Measure your expenses and divide them into necessity and discretionary spend. Once you start doing it you would find that your discretionary spends come down over a period.

3. The Twenty Second Rule: Every time you go to make any purchase, even when you are paying a bill ask yourself stop for some time and ask yourself is this something you really want to spend your money on. Do you really need this product or service. Do you need a 8 mbps internet connection at your home when a slower one can also work because you use it so sparingly. This one simple technique of waiting and thinking for 20 seconds would go a long way in ensuring that you spend less.

4. Don’t Make yourself Miserable: Most of the time when you cut down a spending habit you don’t miss it. However there are time and things where you start regretting your decisions. If that is the case then probably it was a worthwhile expense for you. Saving money does not mean living a miserable life. It means you cut down unnecessary expenses.

5. Don’t forget the long term picture: While the above rule is true but we must always remember the big picture the bigger goals we want to achieve by making small sacrifices today. If we remember the bigger goals we are more likely to spend less today for a better tomorrow.

This is the second part of the series 5 universal rules of personal finance management.

Please let me know your thoughts on it