People have wrong notions about finances. They think it is all about investing in instruments offering the highest return at any point, getting in at the right time, have foresight to exit at the right time (ideally the highest point) and ensure that there are no taxes to be paid.
They expect their advisor to do just this. If that is the idea of an advisor, only God can be that advisor.
It is next to impossible for a human advisor to do all these on a consistent basis. Many claim they do. Either they are God or frauds. We all know that sighting God is extremely rare, almost impossible. Now you know who these people are.
However, there are things a good advisor can do – identify your risk profile, understand your goals, financial situation, create a portfolio that meets the liquidity and tenure needs, implement the actions, manage/ monitor the portfolio and make appropriate changes along the way, offer ongoing advice, etc.
But there is one that an advisor can do that is even more valuable than all of this — plugging the leakages in your moneybox. You probably may not realise how much money is leaking and how you can save lakhs every year, by plugging these leakages. Let us dive in.
Fixing the leaky bucket
Like the proverbial bucket which has holes, money leaks from our kitty, all the time. You may think that happens to others, not me. There are invariably many leaks, which we would have plugged while doing the plan. I’m going to point out just three of them:
Huge bank balances
Having a huge amount of money for liquidity needs in the bank may seem comforting. But it is hugely draining.
Assume one has Rs 20 lakh in the savings account at 4 percent a year. It could have been invested and be near liquid at 7 percent per annum. The money lost here in a year is approximately Rs 60,000. There are many who come to us with huge sums in the bank. As advisors, we have faced situations where people have had up to Rs 2 crore in their account.
Even today many are paying Rs 4,000 – 5,000 per month on telephone bills for 3-4 numbers they have in their family. Similarly, we see people paying between Rs1,500 and Rs 2,000 a month for Internet plans, sometimes even more.
Today, the typical telephone plan costs between Rs 150 and Rs 200 a month, which includes free calls, free roaming and 1.5 GB of 4G data per day. All operators offer packages for around a 90-day period, for less than Rs 500. The telephone bill hence, for a family should be under Rs 1,000 per month. Yes, these are pre-paid plans. Many feel pre-paid plans somehow offer lower benefits and are down market. The reality is that they are as good as post-paid plans and are far cheaper. Today recharges are painless and can be done on the mobile itself. So, there is no reason not to get into pre-paid plans and take advantage of the huge cost savings.
Similarly, Internet plans with good speeds are available for between Rs 500 and Rs 800 a month. There is no need to spend a couple of thousands on it. You just need to look around and identify the one that suits you.
The savings on these two can be between Rs 40,000 and Rs 60,000 annually.
Annual Maintenance Contracts (AMCs)
Many people enter into AMCs for just about every appliance at home. This is not needed at all. Normally nothing happens to our refrigerators, washing machines, music systems, TVs etc. And Rs2,000-3,000 per appliance may look like small change. But it adds up. Instead, what you may need is a service contract for certain appliances like AC and water purifier. For all other appliances, all you need is a vendor who is available on call, when you have a problem. If you find it difficult to get such a person, try apps like Urban Clap.
It is again made to appear that for computers, AMC is a must. Nothing could be further from truth. The AMC charge is between Rs3,000 and Rs 4,000 a month per computer. Again, this is not needed at all. If there is a problem, there are vendors aplenty who will attend to it at nominal charges. If there are some parts to be replaced, that will be at a cost. My personal experience of about 30 years of owning computers bear that out.
The savings here can be between Rs 15,000 and Rs 30,000 per annum, depending on how many AMCs you are running.
There are many more
You can get up to 20 percent off on your medical bills, by purchasing through apps like Pharmeasy, Netmeds etc. These add up to significant savings. There are shops like Generico which will give you the generic equivalent of your medicines at very low prices. Even if it is the same brand, you get it for much less. You can purchase groceries through online portals which would ensure significant savings.
The things mentioned here does not in any way impact your lifestyle or convenience, but can together save you lakhs of rupees. There are so many more like these, if you carefully look around.
Money saved is money earned. It’s our hard-earned money. Why then treat it cavalierly? Let us learn to respect money. And make it work for us.