Personal Finance: The Month-end Crunch

PERSONAL FINANCE
The Month-end Crunch

Read this and there'll no longer be so much month at the end of the money.

By Shilpa Nayak

Something all it takes is keeping track of the peenies

It started when you were in school, it followed you to college, and now that you are in a reasonably well-paying job, it still refuses to let go of you: the month-end crunch. That last week of the month when you start politely wriggling out of luncheon invites, because your credit card company has already twice sent you a payment reminder (they have to wait until the next pay cheque, too). You won't borrow from the spouse because a few hundred bucks aren't worth a life-time of ribbing. Those three thousand rupees in the bank cannot be touched because your car payment is due next week.

Sulking darkly thus on your way home, you wonder: ''How do I manage to get caught in such a bind month after month.'' The answer, dear spendthrift, lies in accounting; you simply don't keep track of your spending. Yeah, yeah, it's a bother having to remember that 20 bucks you spent on coffee or, that Rs 16.75 toothbrush. But what would you rather be? Broke and a lot bothered, or cash-rich and just a little bothered? Surely, the latter, right? Here are three questions you need to ask yourself to avoid that month-end problem.

How Much Do I Make?

Your Diagonistic Kit
THE PROBLEM	THE CURE
My Balancesheet just doesn't add up	Jot down all spends, ask for bills and file them religiously
ATM has become a bad, bad habit	Curb your impulse to spend; remember, credit is expensive
Where did all these card bills come from?	Restrict your card spend to, say 15% of your net pay
Broke at month-end, what did I do wrong?	Save! Set aside atleast 10% of your net income every month

To figure out how much you can spend in a month, you first need to figure out how much you actually make. Doing that may not be difficult, but it does take some conscious effort because most salaried people have different components to their salaries. For example, there's a basic pay that you get by way of a cheque; there are some expense reimbursements (conveyance, phone bills, housing furnishing, and medical) that are available monthly, but not all of us bother to collect them every month. The pitfall in such a situation is that you might remember a nice round figure from your last increment letter, but the fact is you only claim a part of it every month. So, incurring expenses keeping that big figure in mind would be a mistake.

How Much Should I Spend?

In a sentence, much less than what you make. Break up your usual monthly expenses into fixed and variable expenses, including house maintenance, food, conveyance, clothing, children's school fees, entertainment and miscellaneous. Put away a small sum for gifts, eating out, medical costs, repairs, and other emergencies. While budgeting, take the opinion of all members of the family. That way nobody can spring a nasty surprise.

SNIPPETS

Cheque This One Out

This Fortune-500 offshoot is living up to its parent's maxim of "building a worry-free world". Zurich India Mutuals has come out with pre-issued, repurchase cheques called Zuricheques, which investors can opt for at the time of investing in any of the firm's schemes. That done, investors can just dot in the dates on the cheque and walk their way to the bank instead of going through the tedious procedure of filling up a repurchase form, sending it to the Investor Service Centre, and then waiting for the cheque to be delivered to them. Investors will be provided with Zuricheques worth 75 per cent of their investments or Rs 2 lakh, whichever is lower. Zuricheques come in Zurichequebooks of 20 leaves and Rs 1,000, Rs 2,000, Rs 5,000 and Rs 10,000 denominations to choose form.

Overdrafts On The SB Highway?

Yes, this is paradise: Standard Chartered Bank has launched a new smart credit account that will, in effect, be a normal savings one with an overdraft facility. The account holder will be allowed to withdraw cash equivalent to three times the monthly salary deposited into the account. Like a normal savings account, an ATM card and a chequebook will be issued to the account holder.

The smart credit account is flexible with no predetermined repayment schedules. The customer can choose to repay part or whole of the overdraft as and when he wishes to with the lowest repayment being 5 per cent of the overdraft. "A flexible line of credit is something our customers have been wanting for sometime now. Smart credit will fill in this gap," says Harpal Duggal, Chief Executive, Standard Chartered Bank (India). Launched in Chennai and Mumbai, and soon to go national, this account will attract an annual fee of Rs 600.

Say Credit Cards, Say Chennai

Ever wondered where all that plastic money comes from? Well, the answer now is just as far as Chennai, where India's first ever credit card manufacturing facility was unveiled this fortnight. Set up by $60-million Versatile Card Technology, a leading US-based credit and smart card manufacturer, the 100 per cent export-oriented unit in Chennai will incorporate the latest technology and standards will comply with requirement laid down by Mastercard and Visa.

There are some expenses like insurance premium that you have to pay on a yearly basis, or house maintenance that may be paid on quarterly basis. Try and ascertain your annual or half-yearly expenses into a monthly figure so that the appropriate amount can be stashed away, and withdrawn when these bills become due. For example, your car's comprehensive insurance policy has a yearly premium tag of Rs 12,000. Set aside Rs 1,000 a month for it. Doing so won't just save you from a crunch, but will also earn you interest income.

What Are My Financial Goals?

Finally, list out all payments to be made against borrowings, be it credit card debt or a monthly payment towards a car loan (in case it doesn't already get deducted from the salary). Now the figure that remains with you had better be positive, because you are in trouble if it isn't. It's with this positive figure that can you chalk out your future financial goals like buying a house, a new car, taking a vacation abroad, investing in the daughter's higher education, or personal investment.

This three-question guide can be made as flexible as you want. After all, your budget should be structured to suit your needs and priorities, with special importance being given to personal financial goals. Whichever way the budget is structured, the most important part of the exercise is implementing it. While some of us might find book-keeping difficult to do month after month, others may not feel the necessity to make one at all. ''If I know I am spending the right amount of money at any given time, I don't think I need a budget to follow,'' says Sumeet Nair, a senior flight attendant with a private airline. But, alas, not all of us are so self-disciplined.

The Model Couple

Sheetal, 35, a housewife and Shyam Raghavan, 37, an IT professional, are staunch believers in budgeting. Shyam got into this budgeting habit about 10 years ago. ''It was a lesson that I learnt from sheer folly. I got into a terrible debt tangle with my credit card, after which I decided to write down whatever I spend.''

A wisened Raghavan today keeps a notebook in which the couple jots down all their daily spendings. ''That includes everything from groceries to conveyance to eating out,'' says Sheetal. Keeping account, however, doesn't mean you scrounge. The Raghavans, for instance, spend Rs 4,000 a month on their eight-year old daughter's tennis lessons. Explains Raghavan: ''Book-keeping may sound boring and daunting, but believe me it takes all of 10 minutes when you get down to doing it.''

So, the next time you feel like skipping book-keeping just think of that great sale or date you missed because you were broke.

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