In our day to day life we spend money for so many things. Few things we require frequently and few things depend on our wish and even if we do not have these things we will remain fine. Rarely do we take some time to notice how we are spending, where we are spending and what effects of it are. In a way few costs are fixed every month and few other varies on our wish and we can control these variable costs easily.
Despite of our amount of income, whether we earn or not, costs which we must have to incur are called as fixed costs. Come what may you need to pay this. Costs which may depend upon your usage or will to buy something but you will be fine without it or you can delay or cancel then such type of costs are called as Variable Costs. Costs which are not regular and may come unexpectedly are variable casts (ex – some kind of surgery or hospitalization cost etc). You may have greater influence to control on this variable cost but if your fixed cost is rising then for sure know that you are heading towards bigger trouble and eventually it will lead you towards situation of lesser and lesser money in your pocket and finally even bankruptcy
Lets look at some of the examples of fixed and variable cost. Now look at these and decide which one are increasing day by day.
Fixed Cost
- Electricity Bill
- Gas Bill
- Water Bill (Though Electricity, Gas, Water bills depend on our usage but incase of households we need that every month and bare minimum charges we will have to bear and without these we cannot live)
- Television Recharge
- Internet Charges
- Maintenance of Apartment
- Muncipal corporation taxes
- Groceries (it is little variable but you need every month)
- Monthly Transport Cost
- Yearly Premiums of Various Insurance
- Vehicle Servicing and Maintenance (If you have) and Fuel Expenses
- School/College and Tuition Fees
- Fixed medical expenses of long term diseases (Ex – BP, Sugar etc)
- Water Filters (If you have one)
- Any EMI of loans
Variable Cost
- Phone bill
- Mobile Bill
- Clothing
- Any Holiday
- Unexpected Medical Expenses
- Eating in Restaurants
- Movies/ Drama etc
- Furniture & any other Electrical equipment
- Cell phones, laptops or any other such tech gadgets
- Home decorative items
- Consumption of Liquor, Cigarettes, Tambakhoo, Gutkha
I have tried to highlight some of the examples and there could be many more. If we keenly observe, our Fixed cost is rising and not only that no of parameters which are falling under fixed cost they too are rising. This is the most dangerous situation to be in. Just imagine if tomorrow if you lose your job then how are you going to pay these costs as you earn or not they will be accumulating. Even if you do not lose your job then see how much money they are draining out of your pocket.
Now just check if you are facing these scenarios in case of fixed/ Variable Costs
- Electricity and Gas prices rising before every winter
- Water Charges are rising or due to polluted water you are forced to buy pure water or water filters
- Rising Phone, Cellphone bills
- Train/ Bus tickets rising every year
- Maintenance of Apartments rising
- Various taxes rising
- Cost of vehicle maintenance rising (fuel, servicing, tyres etc)
- EMIs are rising
- You have too many gadgets or their newer and newer versions
If above situation is true then it is not good and for sure your savings rate must be very low. First thing we all need to do is collectively (Individuals, Society and Governments) reduce things which are falling under fixed costs and try to reduce cost of every parameter which is falling under fixed cost. We all need to think how can we reduce our electricity bills, how can we reduce various taxes, how can we stay away from all loans infact you must stay away from all loans. First earn and then spend out of your earnings. Do not borrow and spend in anticipation of your future earnings. Stay away from unwanted insurance products (they are good for bankers but not for us). Devise innovative transport mediums. Check if all of you can grow organic vegetables, fruits, common herbs in some common places. Like this we need to collectively work out and we all must reduce these costs.
Second is reduce variable costs. If you have discipline in yourself then definitely many of them can be reduced.
- Just because there is ‘Sale’, don’t go and buy useless things. Check if you really need them.
- Just because something is tempting for house decoration do not buy and waste your money.
- Focus on your health. In a feverishness to make money, people run around for it and lose their health. Later on they spend whatever they earned to get back their health.
- Stay away from this madness of having every newer version of tech gadgets with you. You will end up spending huge money unnecessarily on it. Tech companies know this and they keep on bringing newer and newer models of same product every few months. Big euphoria is created on Television, Electronic and Print media. Various tricks are used to make the product popular even before its launch and it is ensured that anxiety of people is at highest level for these products. There are people who want to rush to stores to buy first and flaunt it. If you see they become so joyful after it as if they have got back their own kidneys! Know these traps and do not fall into it and waste your hard earned money. There are tech companies whose assets are have grown up so much that they can easily buy any small country!
- Stay away from Liquor, Cigarettes, Tambakhoo and these pan masalas (Gutkhas). Just because it is shown in movies cool thing to drink liquor or smoke that doesn’t mean it is cool thing. Look at the sponsorers of these movies and many of them you will find are these liquor and cigarette companies. Every hero in a movie will have liquor glass or will smoke in order to position that brand as cool thing to do and hero in you then begins to follow this. More the people are addicted to it more are their profits. This is not good. One single bad habit can destroy your entire life. These bad habits not only bring your own destruction but it drags entire family along with it. If you get various diseases due to consumption of these products then your family will have to spend huge money and they all take a hit.
I hope this very high level, little but important info will help us in realizing and noticing our money drainers and increase our savings rate by keeping tap on these drainers!
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