"Sakhi saiyyan to khoob hi kamaat hai... Mehengayi daayan khaye jaat hai!"
This is a song from the film Peepli Live. It's not just a song, though. This is the real truth that most families are dealing with in our country today. The rising prices of everything, especially of food items, have left everyone hungry and cold. Divali was a subdued affair this year, and people have no hopes for the New Year either. People are not buying things because they barely manage to feed 3 square meals to their families! India has the highest rate of inflation in the world, matched only by Vietnam. So what should one do to manage finances in such a bad economy?
1. Save and Invest. Tis is to protect you against long-term effects of inflation. If you have Rs. 100 today, and inflation is at 10%, next year the value of your money shall only be Rs.90. So it is important to invest your money in such a way that it protects you against inflation by giving a rate of return that is higher than the rate of inflation.
2. Consider all Investment Options. If you are young, you should try to get some exposure in the equity markets. If you don't feel confident, invest in a mutual fund that invests in debt-and-equity. Similarly, if you are not so young, or don't feel comfortable with equity, don;t just park all your money in an FD. Look for other options too. FMP funds are also like FDs but with a much better tax saving built in.
3. Invest in Gold and Real-Estate. These options give good results over the year, So some of your money should be invested in these too. If you cannot afford to invest in real-estate, invest in a fund that does!
4. Look for Deals. Spend a little time online to look for deals and coupons that can be used to purchase stuff at lower prices.
5. Seconds is Fine. There is nothing wrong in buying second hand products like automobiles, furniture etc, as long as the quality is good and you save money!
6. Cook More. Eating out is an expensive business, so try to cook more for yourself and your family.
7. Watch Films on DTH. Watching a movie with your family costs noting less than 2k, but watching it on Tata Sky or Dish TV (a mont later) costs only Rs. 100/-
8. Get a part time job!
The idea is simple, try to cut costs and increase your income/saving/investment. As long as you keep doing tihs, you should be fine!