Topic 3 : Cost saving and income increase
Expense control
In developing a plan on management of money and expenses, the following factors shall be taken into consideration.
1. Personal future and debt repayment: A portion of money should be allocated for personal future whenever there is income. Do not ignore the habit of savings. Regular savings will help cultivate the habit of savings.
2. Frugalness and regular income-expense bookkeeping: We should always take into consideration our real need before buying. Recording of income and expense transactions will enable us to build up a discipline of spending and control our spending.
3. Investment based on acceptable risk: Apart from accumulation of savings, we may add our value of savings by investment or “let money work for us”. It is important that we know that investment is always associated with risk. We should always study information prior to investment.
4. Safeguarding of life and assets from unexpected circumstances: Accidents can occur at any time. Whenever there is an emergency and a large amount of money is required, taking out insurance will help attenuate the seriousness of the situation. Financial planning can provide oneself and family financial security and confidence in leading’s one life.
Expense control guideline is as follows:
1. Prepare a list of items to buy before going out to buy such items. We should take note of what to buy and directly go to such items on the list. Do not buy unnecessary items because of their promotional campaigns.
2. Compare the price and the quantity of the goods ensure that the goods to buy meet our need and are cost-effective. Brands and quantities may be benchmarked because sometimes manufacturers may produce different shapes of packages and packages of bigger sizes may contain less quan tities than smaller ones.
3. Check available coupon/special discount. Supermarkets often give away coupon or special discount to attract customers to use services again. When receiving coupons, we should check expiry date and use such coupons in buying necessary items such as detergent, toothpaste, soap, etc.
4. Know where to buy inexpensive items. Knowing where to buy items at low prices will help us save some money. Although such saving is of a small amount, many times of saving could mean a large amount of money.
5. Grow household vegetables. Growing household vegetables especially those frequently used for cooking such as parsley, basil, sweet basil, chili, lemon, etc. for household use can help save expenses. It is also an enjoyable hobby.
Besides, we should help together to save other utility expenses in our household such as water and electricity. We should not leave water and electricity turned on without necessity.
Try to choose electric appliances attached with lables showing energy consumption efficiency at leved 5, etc. If all household members help together in saving expenses, it is highly like that household expenses will be reduced, hence increase in family savings.
Expense reduction
Expense reduction is another way to help increase savings of a family. The guideline is as follows:
1. Food expense
- Grow household vegetables or fruit trees instead of ornamental plants since, apart from providing shades, such trees will also produce fruits for household consumption.
- Do not go to supermarket without purposes. We should take note of items to buy and prices, so that we know possible expenses in advance. If there are several members in a family, cooking is recommended.
- If products are of equal qualities, choose the brand with the lower price.
2. Utility expense
- Use useful technologies such as writing emails instead of using long distance calls. In case of verbal communication, one would connect webcam and microphone to computer.
-Buy electric appliances that meet standard. For air-conditioner, the temperature should be set at 25 degree celcious. Air filter should be cleaned frequently.
- Grow trees around buildings as one large tree can provide cool air equal to a one-ton air-conditioner or approximately 12,000 BTU.
- Frequently check water and electricity bills to see if there is any irregularily high cost. Sometimes, there might be leak of water and electric current. In such case, we should call technician to conduct a check so that we do not have to pay unneccessay expenses.
3. Clothes and accessories
- Set up a purchasing limit per month at 10% of income and refrain from buying brandname clothes and shoes. (Do not consider buying items just because of their brands)
- Choose clothes of simple styles suitable for various occastions. Avoid fashionable clothes which may become out of trend soon.
- Sell old, unused items to help increase savings.
4. Miscellenious expenses
- Do not buy items without real needs. Before buying, we should ask ourselves if we really need such items.
- Learn to do things by ourselves, for example, washing car, changing oil and oil filter, or doing one’s own hair or nails without going to beauty salon.
- Try to find recreational or relaxing activites that are costless such as walking for taking exercise in the public park. These activities are enjoyable and free.
- If flying is necessary\, try to book flights in advance as there might be a 30-50% discount.
5. Selection of electric appliances
5.1. Electric rice cooker
- Avoid using too large electric rice cooker for family members as it consumes high level of electricity. The appropriate size of the rice cooker for 1-2 persons is 0.3-1.0
litre, 3-6 persons 1.0-1.5 ltires, and 5-8 perfsons 1.6-2.0 litres.
- Do not put too much water as it will cause rice to be slowly
cooked, consume high level of electricity and make rice soggy.
- Do not open the lid of the rice cooker while the rice is not fully cooked otherwise heat will be released and rice will be slowly cooked, hence higher electricity cost.
- Unplug the rice cooker when rice is cooked to save electricity.
5.2. Electric kettle
- Use appropriate amount of water when boiling as needed or not above the specified limit to save energy and prolong the useful life of the electric kettle.
- Do not boil water too long before usage to save electricity.
- Do not put cold water in the kettle and boil the water immediately as it will cause the kettle to work harder than water at normal temperature, hence more electricity.
- The kettle should be washed to remove stain and lime scale otherwise heat will not be transferred efficiently, hence increased time of boiling and more electricity spending.
5.3. Washing machine
- Always rinse clothes or set cloth rinsing program before washing to help remove ditry items, hence reduced electricity spending.
- Cloth load should match machine capacity, not too large or too small. Too small load would cause inefficient use of electricity and water. However, too large load aimed at cost saving should be avoided as it will cause the machine to work too hard.
- Use detergents specifically required for each machine and set washing program that matches types of clothes.
- A washing machine coupled with an electric dryer will be very electricity-consuming. Therefore, it is recommended to dry clothes by using sunlight. A dryer should be used only when necessary such as when it rains and there is high moisture in the air or when there is urgent need for such clothes.
5.4. Electric iron
- Clothes with small wrinkles will cause less ironing time and save electricity consumption. Therefore, before hanging clothes, we should shake clothes out and stretch them up.
- Iron large load of clothes. Before ironing, spring water on all clothes but avoid causing too much moisture as it would increase ironing time and consume higher electricity. Ironing should be done continuously until finished.
- Sort clotes to facilitate convenience. Iron delicate clothes first. Set temperature that matches types of clothes. Frequent change of temperature would consume higher electricity.
- Unplug iron 3-4 mintues before ironing is finished as there is still heat left and some clothes such as handkerchiefs can be ironed.
5.5. Vacuum machine
- Use appropriate size of vacuum according to functional necessity. For example, when vacuuming carpets or clothes with a lot of dust, use of high-power machine is recommended. As for houses with wood or cement or marble floors easy to clean, low-power machine may be used to reduce electricity consumption.
- Remove dust filter to clean. If the filter is jammed with dust and debris, this will reduce its functional efficiency, hence more vacuuming time and electricity consumption.
- Remove and empty bag or box containing dust. Do not let it filled up with dust as motor will have to work harder and could be burnt and higher electricity will be consumed.
- Prior to vacuuming, we should check all joints of suction ducts or other parts to ensure tightness. If the air is leaked, the efficiency of the machine will be reduced, hence higher workload and electricity consumption.
- Do not use vacuum machine to vacuum dust or materials which contain water, moisture and liquid as well as sharp times and flammable agents such as razor, cigarette, etc. as this could harm components of the machine.
- The type of suction head should match the charateristics of dust or location. For example, the small suction head should be used with corners or small areas that are hard to access. The suction head with brush shall be used with lamp, ceiling, picture frame, etc. If wrong type of suction head is used, it could reduce functional efficiency of the machine, hence higher electricy consumption.
5.6. Hair dryer
- Choose appropriate size of hair dryer. The larger one with high power is more electricity-consuming.
- Dry hair with towel before using hair dryer to dry/do hair to help compared to “hot air” function.
- Use “cool air” botton to dry hair. It can save more electricity as save electricity.
- Do not use hair dryer for wrong purposes such as to dry one’s clothes to save electricity and ensure cost-effectiveness.
These are tips to help save energy which we should not overlook. Small details regarding use of electric appliances in daily life can help us save electricity cost.
Accumulation of savings is considered a key method for increasing income in life. Key details are as follows:
In the Royal Instiute Dictionary B.E. 2525, the definition of saving is as follows: Saving refers to (a) to be frugal and to gradually accumulate things, for example, to accumulate money; to preserve or to conserve things, e.g. to preserve one’s energy. According to the above definition, saving refers to frugalness, accumulation of money, preservation, and conservation of things that must be used frugally or gradually accumulated such as assets, money, gold, etc.
Savings refer to the remaining income or the reserved part which will not be used for paying any expenses for consumption at present. It is intended for use in times of sickness or emergency or when getting old or for other appropriate activities. The part of income which is not used and is kept as reserve can be counted as savings. However, savings kept wihtout doing anything is not considered savings in the context of economics.
Saving means to save assets or to save money. How we can save money and how saving money in the context of economics can create any advantage. The answer which most people understand is that keeping a part of income without using it and using it only when needed are considered saving money. However, in the context of economics, the meaning of savings would be different as described below.
Learning to spend money for consumption prudently and rationoally will help enhance the standard of living. We may be considered a person who knows how to spend in a manner which is economic, smart and appropriate to way of life. However, regardless of such fact, if we do not use our assets or money for our personal gain or family at all, we would be considered a stingy person. For example, certain people wear the same clothes over and over again until they are very dirty and then wash them because they want to save water and detergent. If we know how to spend assets or money, it means that we defer the time of spending such money. For example, a housekeeper normally uses one tank of LPG for a period of 1 month. If the housekeeper is careful in turning on and off the tank to prevent against gas leak, this can prolong the time of buying a new tank. Prolonging the time of buying a new tank is considred prolonging the time of using money. The part that is not wasted is considered “saving” and the prolonging of the time of using money is considered “savings”.
Method for building up savings
Accumulation of savings can be done according to each person’s capabilities. Everyone can seek additional income according to their skills and capabilities. However, such income must be obtained based on integrity, ethics and morality. Examples are as follows:
1. Deposit at bank: Deposit money at commercial banks or other financial stitutuions conducting the same business as banks with the return in the form of interest. In choosing type of deposit, details of services of each bank should be taken into consideration such as fixed deposit, savings deposit and current deposit.
2. Taking out life insurance with savings plan. This will not only provide insurance in case of loss of life but also other benefits as opted for by the insured. Such benefits include return from investment with low risk. The insured may opt for receiving return of fund according to the condition specified in the contract. There are different kinds of services for choosing which are provided through banks or insurance companies. Ths is considered another way of increasing income but it is quite time-consuming such as 5, 10, 15, and 20 years.
Some people understanding that taking out life insurance is like making deposits with banks because the formats of offering of products by life insurance agents are comparable to deposits with banks. However, the differences between taking out life insurance and making deposits with banks are as follows:
3. Doing additional jobs according to one’s skills or capabilities such as handricraft work, cooking, resale of goods, cloth making, etc.
4. Education investment is considered another way of increasing income. Higher education will lead to development of knowleddge, ideas and capabilities. Highly educated people are like to get jobs with initial high salary. Investment in short occupational courses such as cooking desserts or handricraft or art work could also bring additional income if learners could use the skills learned in their occupation.
Ways to build up savings through expense reduction
Consumers may reduce expenses by optimizing the use of items they currently have and using various services in an economical way. This could lead to additional savigs. Building up savings through reduction in expenses can be done as follows:
1. “Buy smart” means to buy items whose cost per unit is low or price is commensurate with quality and efficiency of such items. To buy goods based on functional necessity. Not to buy things or goods extravagant or without actual needs such as to buy things just to follow friends or to get premiums or to be in trend.
2. “Use smart” means to know how to maintain items and appliances under possession and use them economically and in accordande with appropriate requirements. To save electricity, water, fuel, and telephone expenses. Saving will help reduce expenses considerably, hence increase in savings.
Limitation of saving
When we already know how to build up our saving by increase of income, there may be unexpected incidents or things that occurred which become obstractcal to our saving therefore we should be awared of the following things
1. Inflation which making value of money decreases. No matter our saving is in investment or saving account, the earning will be decrease due to the decrease in value of money making buying goods require more money. For example, in B.E. 2548, we used to buy a pen for 100 baht each, if inflation rate is 5% then in B.E. 2549 we have to pay 105 baht for a pen etc. Since inflation caused by overall financial system which can not be controlled by oneself, we should be careful when investing.
2. Lack of discipline in saving. Consumer without discipline in saving usually postpone and can not control themselves to put their saving according to their plan resulting in failure to build up saving or the need to put a large sum of money in each saving in order to have enough saving within a specified time frame.
3. Greed. Some people want to have high reture by putting money in high risk investment which may result in not receivng any dividend or total lost of invested money. Therefore, consumer should consider carefully before investing including making all kinds of gamblings.
4. Unexpected events or emergencies such as accident, sickness, fire, lawsuit etc may be the cause that fails a saving plan and spend saving money. Consumer should find way to prevent this by buying insurance or life assurances which will help to protect saving money from lost and also help to decrease expense.
It can be seen that saving is not aimed only at saving of money but also includes saving of own life and every important things essential for living. In general, saving is a matter that involve people that is the beginning must start at people, saving will occurred because people are educated, have teacher such as parants etc to teach them the importance, necessities, result or benefit of saving and when they grow up they can think by themselves, can do by themselves and can teach other people. Saving is therefore a matter of education and a kind of human development which is the training to know, think, and do good thing. Saving of living, money, natural resources, i.e. forest, water resource, soil, must begin from learning, thinking and practicing as well.
Benefit of saving
In general, saving give benefit to living and our life improvements regardless of saving of money or other resources including living. If we want to separate into topics, it can be separated as follows
1. Economic. Economic means good activities that is activities that help maintaining living and give opportunities to people for their life improvement. Practicing of a profession such as vegetable farming for own consumsion or give away to neighbor or for cash sale or for other living essential goods trading such as medicines, housing, clothes, vehicals etc is call economic activities which is the matter of production, distribution and consumsion. Money is the medium of trading or buying of things therefore it is very important for living.
2. Social. In the process of saving, if we combine saving in level of family, community, village, sub district, province that have been practiced nowsaday, it is clearly seen that saving is good for social i.e. being activity that promote good relationship and make people to think, care and love more to each other such as the case of setting a commitment to save 1 bath expense per day become a tool for the member to think of giving to other member that has limited opportunities, handicap who can not take care of themselves which they will have a chance to help their friend from the day they were born to the day of they die which if this is practiced seriously it will be a way to strengthen family and community.
3. Cultural. Activities which the majority practice widely, have essence which are knowledge, idea, practice with a certain pattern and conducted continuously that is good to those who do it, we consider these as culture. Behavior of saving, activity of saving and result of saving have these characteristic therefore it can be considered as an important culture of the community because of the inner content of saving is having knowledge, practicing methodology and clear result of practice, give benefit to the practictioner in all 4 sides i.e. physical, social, mental and spiritual.
4. Educational. Overall picture of the saving process is the matter of learning, self training of the saver or those who are members of the saving group because they must know the concept, principal and methodology as well as the expected results. When everybody can walk through this process, it can be called that they are entering the process of learning for self improvement and they will find themselves changing for the better in terms of educating, thinking, speaking and doing.
5. Natural resources and environment. Earth, water, forest, animal, plant which we commonly see around us, our home, our community is our life because we need to use those earth, water, tree, mountain, forest in order to survive. To mention about saving of asset or natural resource is an important thing equal to saving of life. Money will mean something when these things exist, without them money is meaningless and become paper or scrap metal that can not be eaten and can not help human life at all. The use of money to manage resources in normal situation is an important matter to think and do.
6. Life improvement. Saving is a matter of learning, thinking and doing. Saving begin with the learning of keeping promise which are the truth that known, think, speak, conduct of ownself that are truthfully spoken, conducted, thought and realized is counted as a learning for self knowing, knowing of relationship between people in family, community, etc. especially family member including wife or husband, children, grand parants. If people in a family know how to keep their word, that means to adopt loyalty, honesty, sincererity, true word, true conduct; to practice abstinence in certain occasions; to be patient, to share items to each toher, and to get rid of distress, they could be considered as achieving the highest level of development in life.
Techniques to practice saving are as follows:
1. To compile monthly income-expense account in order to know which expense is essential and which one can be reduced or pending.
2. Should not keep a large sum of money at hands because it will be spend more easily.
3. Pay credit card debt in full amount and on time to avoid expensive interest.
4. Put money in saving at once when income occured
Interesting article
Save money
Whoever currently having problem should inspect your list of income and expense by review what should be paid and what should be save such as movie rental fee from the shop next door, movie ticket or something that can be save regardless various luxury goods such as clothes, cosmetics, music cd, including reduce the frequency of having parties whould help more or less etc. In conclusion, if income is less than expense then you should tell yourself to spend only for necessary things.
Due to the need of people that are different, unnecessary thing for one people may be most important for other. If you must be responsible for the whole family then you must decide how to spend carefully for having at lease a balance monthly income-expense account.
There was a television spot of a bank that cultivates people to save 1 part and spend 3 parts of their income which is considered a good financial plan for their future. For goodness sake, you should put some of your monthly income into your family saving account because at least this way will help create security of your family in the future.
I will not go into details of household accounting that who has to do what for the sustainable financial management of the family since everybody has different background. To be good, both must know themselves thoroughly. Do not become reckless because money matter is important for living in urban society. If you know that you are overspending, I suggest that you should change your behavior. If possible, you should stay more at home in order to forget all the tempting things that cause you more expense. This easy way will make your family happy.
Do not forget that for household accounting, you can determine things by yourself. You will make a strong or weak financial basis for your family, depending upon today’s planning. It is time that you should sit together and discuss about how to achieve a more balanced income-expense account than in the past.