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Sunday, October 12, 2008

Save Money, Make Money: Episode 2

Concept 2: Carry Out "ABC" Classification of Your Monthly, Value Adding and Essential Expenses on Your Consumption Items and Control "A" Class Items of Expenses to Start With

Stage 1
  • Before making list of value adding, essential items of your regular consumptions, make a list of all the non-value adding, non-essential items that you actually bought during the month under review.
  • Against each such item, write down the quantity bought, it's unit price and by multiplying the quantity bought by unit price, you will get your total actual expenses done by you on the non-value adding and non-essential items that you should not have purchased in the first place.
  • Now, make sure that you will not buy these items in future at all. That's your big saving on a recurring basis.

Stage 2

  • Now, make a list of all the (value adding and essential) items of regular consumptions.
  • Against each item, write down as to how many units of each item you consume.
  • Write against each item the unit price at which you buy the item.
  • Find out total expenses in your currency for each item. To do this, multiply the quantity of consumption by the unit price.
  • Arrange the items in the descending order of value (expenses) of each item.
  • Add all these expenses, you will get your total expenditure of the month.
  • Take the first item on the list and work out what percentage of total expenses it forms.
  • Do the same for the second item on the list and for third item and for all the items on the list.
  • You will find that only first 10 or 15 items on the list may account for about 70% to 80% (or more) of the entire expenses on all the items in a month.
  • Concentrate on these 10 to 15 items for controlling the expenditure on them, to start with.
  • Find out ways and means of controlling expenses on these 10 to 15 items and implement them. You will surely save good amount of your money soon.
  • Good luck!!

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