THE JOURNEY OF FRUGALITY AND ENTREPRENEURSHIP – PART II

This post is a continuation of the previous blog post where we had calculated the monthly survival rate which one needs to pursue his or her dreams. However, what we did not mention in the previous blog was that the monthly survival rate was based on the amount that is based on perceived needs, which can be reduced with effort.

In Part I of the blog, the cash flow requirement (known as the monthly survival rate) was explained as being the numerical total of the following expenses:

-          Rent

-          Groceries

-          Medical Expenses

-          Transportation

-          Clothing

-          Utilities (gas, electricity, internet, phone)

-          Social Expenses (dinners etc.).

Now we will analyze that how much of these expenses are actually needed and how much are the expenses that are based on the social strata to which he/she belongs. The results may surprise you and you will realize that following one's dream is easier than one might think!

Let us briefly analyze each and every expense in detail and see where they can be reduced. The following is the expense wise analysis:

Rent

What is the amount you spend on rental for your home whether it is in the form of mortgage for a home or a tenancy agreement? Do you really need the space according to your family's needs or are there areas where you can reduce the rent for e.g. fewer rooms, moving to a cheaper area etc. If you can make way with the lower rent, then make that move ASAP to reduce the fixed expense load of a rental.

Groceries

What is the amount you spend on groceries? Does your grocery contain various processed or branded foods or a higher meat intake? You can reduce the expense by buying raw fruits and vegetables more and substituting meat with vegetables, which will also improve health and ultimately save health costs later.

Medical Expenses

This is an unavoidable cost and which one should ensure that the best health treatment is obtained. However, to minimize your health costs one should adopt a healthy lifestyle of a good diet and exercise regimen.

Transportation

Analyze your monthly expense in transportation expenses. What is your current mode of transport? It can be any of the following:

-          Walking,

-          Buses,

-          Taxi,

-          Rickshaw,

-          Personal Motorcycle or

-          Personal car

Try replacing your current transport modes with cheaper alternatives for e.g. if your house is near your work place try walking to work or try to use public buses (the cheapest alternative) in favor of Taxi, Rickshaws or personal automobiles. Carpooling with colleagues is also a favorable option to bring down transport costs.

Clothing

This is an area where one can save a ton! Usually we spend a lot on clothing and fashion items which we rarely use in the long term. Thus, buying clothes from Zainab Market (a great place to shop in Karachi) instead of branded outlets can save a ton of money!

Utilities (gas, electricity and telephone)

This is another area where one can save money. Analyze your family's utility requirements for e.g. are you using air conditioners a lot or are you using land-line to dial your mobile phones which can cause higher phone bills? Small changes to the lifestyle can save up on utilities for e.g. reducing air conditioning usage.

Social Expenses (dinners etc.)

This is a huge area where Pakistani society wastes most of its money.  The primary reason for this expenditure usually is to fit in and be accepted in the social circle. Analyze your expenses and see how much of it is wasted and consciously stop these expenses.

THE SOLUTION

Using the revised numbers now calculate the amount that you actually need in order to pursue other meaningful passions and not to mindlessly keep on working for the sake of lifestyle maintenance. The following table will be a good aid to see how much you can save up by changing your spending habits:

Expense type	PKR per month Currently spent	PKR per month needed for suvival	Difference (which can be saved)
Rent	XXX	XXX	XXX
Groceries	XXX	XXX	XXX
Medical Expenses	XXX	XXX	XXX
Transportation	XXX	XXX	XXX
Clothing	XXX	XXX	XXX
Utilities (gas, electricity, internet, phone)	XXX	XXX	XXX
Social Expenses (dinners etc.)	XXX	XXX	XXX
Total (monthly survival rate)	XXXX	XXXX	XXXX

Now this saved amount must be invested to ensure that a stream of cash flows is available for one to pursue his / her dream with a free mind (for a two year period as mentioned in the previous part of the blog). The following are examples of investment options to name a few:

-          Gold,

-          Silver,

-          Mutual funds,

-          Saving certificates,

-          Stocks etc.

Investments will help lock in your savings so that your long term goals can be achieved.